COVID-19 has been a significant point of contention in construction contract language and its ability to excuse a contractor from liability. When contractors sign off on a promise to perform, they enter into an agreement that their job-related responsibilities will be completed, regardless of work or economic conditions. However, most contracts contain a force majeure clause: This clause stands to protect all parties from liability in the case of unforeseeable, catastrophic events. Force majeure contract language refers to these events as an “Act of God.” Conversely, some contracts do not contain a force majeure clause and instead rely on state and federal precedents of impossibility, impracticality, and frustration of purpose.

In the construction industry, a common force majeure clause is found in document AIA A201, which states that “If the Contractor is delayed at any time in the commencement or progress of the Work by (i) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor; (ii) by changes ordered in the Work; (iii) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, or other causes beyond the Contractor’s control; (iv) by delay authorized by the Owner pending mediation and binding dispute resolution; or (v) by other causes that the Contractor asserts, and the Architect determines, justified delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.” It is important to note that the language used here does not specifically state a pandemic as reason for enacting a force majeure clause. 

On the contrary, a federal guidelines document regarding force majeures, 48 C.F.R. 52.249-14, states that “Except for defaults of subcontractors at any tier, the Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without default or negligence of the Contractor. Examples of these causes are (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight embargos and (9) unusually severe weather.  In each instance, the failure to perform must be beyond the control and without default or negligence of the Contract.  Default includes failure to make progress in the work so as to endanger performance.”

Many contractors have been unable to exercise force majeure clauses and avoid liability because of incomprehensive language: Document AIA A201 is used much more frequently. Holland and Knight LLP addressed this in an article on their website, “It’s worth noting that the current version of the AIA A201 does not specifically address pandemics, while the form ConsensusDocs 200 identifies ‘epidemics’ and ‘quarantine’ as being considered excusable delays under the form language.”

In the event that a contract cannot be altered, Holland and Knight LLP notes that it still may be possible for contractors to avoid liability by way of frustration of purpose – a legal term that excuses liability when unforeseen circumstances undermine the purpose of the project only if both parties agreed upon the purpose of the project. The U.S. Court of Appeals, Fourth Circuit, released guidelines on the feasibility of applying frustration of purpose to contract litigation by stating, “a party relying on the defense of impossibility of performance must establish: 1) the unexpected occurrence of an intervening act; 2) such occurrence was of such a character that its non-occurrence was a basic assumption of the agreement of the parties; and 3) that occurrence made performance impracticable.” In the future, we may see this language applied to more contractual agreements because of the magnitude of COVID-19 and its associated impacts on contractual liability.

Overall, COVID-19 has had many impacts on the construction industry, including the ones I have mentioned and many more. It will be interesting to see how construction companies continue to navigate through the pandemic and, furthermore, how they will plan for future disruptions similar to COVID-19.