The COVID-19 pandemic has caused re-examination of many things. The impact on how we conduct our daily lives is undeniable. Conventional frameworks have been tested, to say the least. Although lawyers drafting contracts are paid to consider eventualities that may never occur, few if any envisioned the current situation when drafting and negotiating the contracts in place for ongoing construction projects. Although many construction contract provisions are considered “standard” or “market,” their application in these unique circumstances presents new, uncharted challenges, and, just as importantly requires a fresh look at how to draft these provisions going forward.
Three contract provisions have come into particular focus when it comes to the impact of the pandemic on construction projects—force majeure, suspension and termination. Many state and local governmental orders required construction projects to shut down. Social distancing and other mandatory safety measures may have impacted the progress of ongoing work, even in locales where all or certain types of construction were deemed “essential” and thus exempt from shutdown orders. Because of the impact of these orders, two main questions emerged—is a contractor entitled to a time extension and additional compensation for such impacts, and what rights do the parties have to terminate or suspend the work; and, if they do, what compensation is owed to the contractors in the event of a suspension and termination?
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