COVID19 and Construction Contracts

The world as we knew it changed in March 2020, the time many construction projects are gearing up for warmer more favorable weather. According to Colorado’s Public Health Order 20-24, construction was identified as a critical business that could remain open during the Stay at Home Order. However, construction was not immune from the economic fallout from COVID19.

Many construction contracts contain terms addressing unforeseen circumstances such as riots, government shutdowns, labor strikes, inability to obtain materials, etc. These contract clauses are often referred to as “force majeure” provisions. This contract clause becomes essential when the occurrence of an event, which is outside the reasonable control of a party, prevents a party from performing its contractual obligations.

A force majeure clause is interpreted within the context of the entire contract and may or may not expressly identify a global pandemic as a force majeure event. Thus, a construction professional who has experienced hardships due to the COVID19 pandemic is encouraged to review the contract for force majeure clause.

Even if the parties’ contract does not contain the term “pandemic” in the force majeure clause, the party looking for relief may want to argue the pandemic is an event beyond the reasonable control of the affected party preventing, impeding or hindering that party from performing its obligations. The affected party also wants to have taken all reasonable steps to avoid or mitigate the event or its consequences. A contractor may want to use this contract clause to renegotiate increases in contract time and contract price. An owner may argue the pandemic does not qualify as a force majeure event or negotiate an extension of time without increase in the contract sum.

While the full scope of the global pandemic has yet to be fully realized, having the right protections in your construction contract that protect you in unforeseen times may make all the difference for your business. Johnson Law regularly advises construction companies and drafts construction contracts to match company objectives. If you have any questions or concerns about how COVID19 has affected your projects or want to make sure your contract protects your company’s interest, Johnson Law’s attorneys are available for consultation.

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