The Law and Your Business– Force Majeure/COVID-19
By Tony Zebouni, Lindell Farson & Zebouni
If you are unable to perform construction services due to the COVID-19 pandemic, the language in your contract may hold the answer to your potential liability. While impossibility of performance is a defense recognized by most courts, the inclusion or exclusion language in a contract is important to read and understand. Many contracts do not contain a specific Force Majeure Clause and the interpretation of those documents will be left to a court or arbitration panel. The following represents sample language regarding the risk associated with a pandemic as defined in a Delay or Force Majeure Clause:
FORCE MAJEURE. Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to any of the following causes (which events and/or circumstances are hereinafter referred to as “Force Majeure”), to the extent beyond its reasonable control: acts of God, accident, riots, war, terrorist act, epidemic, pandemic, quarantine, civil commotion, breakdown of communication facilities, breakdown of web host, breakdown of internet service provider, natural catastrophes, governmental acts or omissions, changes in laws or regulations, national strikes, fire, explosion, generalized lack of availability of raw materials or energy; provided that the parties stipulate that Force Majeure shall not include the novel coronavirus Covid-19 pandemic which is ongoing as of the date of the execution of this agreement.
For the avoidance of doubt, Force Majeure shall not include (a) financial distress nor the inability of either party to make a profit or avoid a financial loss, (b) changes in the market prices or conditions, or (c) a party’s financial inability to perform its obligations hereunder. (Bloomberg Law)
The AIA A201-2017 (AIA A201) General Conditions does not use the term “force majeure”. The AIA A201 contains language, including but not limited to the following: If the Contractor is delayed at any time in the commencement or progress of the Work by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions or other causes beyond the Contractor’s control; or other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.
COVID-19 impacts could provide a legal defense in a case of non-, or delayed, performance but there have not been sufficient reported cases to state with certainty how. If any COVID-19 defense would be treated by the courts. You should negotiate the best language in your contract that best protects you from extraordinary events.