By: Jon Straw
What should you do when it seems you can do nothing?
COVID-19 and related mitigation efforts have seemingly created new problems demanding new solutions. But what if the problems are not so new? What if some of the best solutions are already tried and true?
Many contracts (and most public contracts) have some type of clause providing relief for unforeseeable events beyond the control of any party to the contract. Such clauses may be labeled “Force Majeure” or “Acts of God.” Under these clauses, when an unforeseeable event (or events) occur that are beyond the control of any party to the contract, then the effect(s) of the event(s) are excused. The most common effect is delay.
The remedy is a non-compensable time extension. The owner will not assess liquidated damages and the contractor receives a day-for-day schedule extension proportional to the duration of the event(s). Historically, contractual parties have agreed with relatively little dispute that when certain events occurred, more time was simply granted. As a result, each party bore its own costs and shared some of the pain because neither party caused the event(s). In such cases, the contractor covered its own extended overhead costs and the owner postponed its own use and enjoyment of the finished project.
Since March 2020, owners and contractors alike have grappled with whether certain events (e.g., labor shortages or supply chain delays) are, in fact, foreseeable and not the fault of a party to the contract. Often, such events by themselves are not qualifying events that could excuse delays. Typically, contractors are the first to blame for such issues. Throughout 2020, many public owners readily granted time extensions and did not assess liquidated damages. But, as the pandemic lingers, some parties are less agreeable. This is because the longer it lasts, the delays and effects are more foreseeable.
By late 2020 and into 2021 as new contracts were formed, some parties (both public and private) began expressly including “pandemic” as an excusable event. Although some new contracts now include a pandemic among the list of events, some of those same contracts also limit the scope of when a pandemic qualifies. In other words, a listed event may not be an excuse under certain circumstances. For example, labor shortages alone may not be excusable events, but if a labor shortage is caused by a pandemic, then there may be hope for a time extension and excuse from liquidated damages.
But wait, contractors must still connect the dots proving the pandemic caused the labor shortage. It may seem causation would be obvious—particularly if an infected person(s) cannot work due to COVID-19. On the other hand, what if an entire crew (or crews) cannot work because a crew member tested positive and seemingly unaffected other crew members cannot work while they await test results and/or a quarantine period? And, what effect, if any, did absent crew members or entire crews have on productivity? There is no universal bright line. But, take hope, proven tactics will help.
First, give timely and proper written notice. Send it to the proper person (e.g., contracting officer), using the proper means (e.g., regular mail may be required although e-mail is ubiquitous), and within the period (probably only a few days) that the contract likely requires. Repeated notice may be necessary. Be safer by not assuming that later-occurring events will automatically be covered by an earlier, blanket notice.
Second, reasonably mitigate the delays and damages arising from the event(s). Contractors will not be excused if they could have overcome difficulties posed by or reduced the impact of any event. Even if the contracting parties disagree over the cause, extent, or price of a change or delay, contractors must continue performance pending resolution of the change.
Third, prove the delays and damages were caused by the event(s). The mere existence of a pandemic does not automatically excuse contractors from delay or default. Document both the micro and macro facts. The micro facts are the person(s) directly affected by the pandemic and their inability to work (dates, times, etc.) and how this affects other laborers. The macro facts are how the industry itself is affected (pricing, trade group perspectives, and other third-party analysis). Document all facts as they occur, not long afterwards. Sufficient documentation should include enough detail that uninvolved decision-makers can later objectively understand and agree your actions were reasonable under the circumstances.
New problems may not need new solutions.
About The Author: Straw is a partner with Kraftson Caudle, PLC, a law firm in McLean, Va., specializing in heavy-highway and transportation construction. Straw can be contacted via e-mail at [email protected].
