The COVID-19 pandemic continues to have a devastating effect on the health of over 1 million Americans and is wreaking havoc on the American economy. One of the industries that is most impacted by the public health crisis is the construction industry. Force majeure provisions may affect whether construction projects are cancelled and what damages, if any, are available.
Q. What is Force Majeure?
A. Force majeure is a matter of contract law. It is a provision that holds parties blameless for natural and unforeseeable catastrophes. Most force majeure matters are specifically defined in contracts.
Force majeure events are usually divided into various groups, such as:
Q. How a Force Majeure Provision Works?
A. At the inception of the contract, the parties agree that if certain, specified unavoidable catastrophes occur, that the otherwise breaching party will not be held liable for the damages that result. The contract may impose additional requirements, such as requiring a party to provide written notice before invoking the force majeure provision or requiring the parties to first engage in mediation or another form of alternative dispute resolution before invoking the clause.
Q. Is Coronavirus a Force Majeure Event?
A. Whether coronavirus is a force majeure event depends on how this term is defined in the contract and the surrounding circumstances. If the contract uses language such as a “pandemic,” “virus,” or a quarantine order made by a government, it is more likely that the current situation will be considered a force majeure event. Likewise, the specific facts will impact whether this event is considered a force majeure event, such as whether the government has ordered the cessation of construction operations rather than a contractor making the decision not to work a crew out of an abundance of caution. Quarantines ordered by a government may be included as one of the events categories as an act of government in the contract.
Enforcement of Force Majeure Events
Force majeure events are interpreted and enforced differently in various jurisdictions. Many construction projects may involve parties in multiple states, so the state law that is applied to the interpretation of the contract can have a significant impact on the outcome.
Some states require the party seeking to invoke a force majeure provision to show that he or she first tried to overcome the event through the exercise of reasonable diligence. In other jurisdictions, the party need only show that the event was not foreseeable at the time of making the contract and was outside the party’s control. In these jurisdictions, the timing of the contract may have a significant impact on whether a force majeure event has occurred.
Seek a Thorough Legal Consultation to Learn About Your Options
Because these are complex issues, it is important that you seek a legal opinion regarding whether a force majeure event has occurred with the outbreak of coronavirus and what your contract rights are.
FAQ: COVID-19 and Force Majeure Provisions’ Impact on Construction Projects