COVID-19 and Construction Law
The ongoing coronavirus pandemic is negatively impacting many industries throughout the world and the construction industry is no exception. Indeed, the pandemic is threatening the very foundation of construction projects: supply and labor. And a cracked foundation often leads to a legal domino effect for project owners, general contractors, and everyone in between. This article highlights several construction law issues and the impact of COVID-19.
Generally speaking, force majeure excuses a party’s nonperformance due to an unforeseeable event. But whether the coronavirus pandemic qualifies as a force majeure event will depend on the exact wording of your construction contract. Some contracts list out what events qualify as force majeure events, while others are more open-ended. Even if your force majeure clause is triggered, it may not completely excuse a party’s nonperformance. Instead, it may require you to provide notice to the other party within a specific time period, mitigate your damages, or attempt to resume performance after the force majeure event ends. To learn more about force majeure, click this link.
Supply and Labor Shortages
Many businesses, both domestic and foreign, are shutting down or reducing operations to combat the spread of COVID-19. This downturn in operations may negatively impact the ability of contractors to timely secure materials and supplies necessary for construction projects. In that vein, contractors should remain in contact with their supply chain to be aware of potential delays or shortages. If there is a supply shortage, contractors should make reasonable efforts to secure the supplies from alternative vendors, if appropriate or possible.
Similarly, domestic stay-at-home or shelter-in-place orders may reduce the workforce available to work at certain construction job sites. Depending on our jurisdiction, construction may or may not be classified as an “essential” business that is allowed to continue full operations during the pandemic.
Many construction contracts require you to give the other party notice of a delay. Under American Institute of Architects (“AIA”) Document A201, notice of a delay must be given not later than 21 days after the delay comes to the contractor’s attention or the claim for time may be waived. But many construction contracts may have different notice provisions, which may or may not allow the contractor more time, regardless of the circumstances.
Health and Safety
Parties should pay particular attention to their health and safety obligations, especially during a global pandemic. Contractors and subcontractors should ensure that their employees are provided with a work environment free from recognized health hazards likely to cause death or serious physical harm. Be sure to follow your local authorities’ guidelines on social distancing and the wearing of personal protective equipment. To learn more about an employer’s obligations under the Occupational Safety and Health Act (“OSHA”), click this link.
The effects of the coronavirus pandemic are unlikely to go away anytime soon. It is important to remain prepared for contingencies, such as labor or supply shortages, and to react appropriately under the circumstances. It is equally important to remain mindful of your obligations under your construction contract, and to follow all notice and timely communication provisions to protect your rights.