LEGAL NEWS


Coronavirus and Construction Contracts: Who Bears the Risk?


By Richard M. Shapiro, Farella Braun + Martel LLP


unavailability resulting from the COVID-19 pandemic under typical building construction contracts? Although the answer should depend on the language of a specific contract, unfortunately there is also some uncer- tainty due to the application of state law doctrines. Te most commonly-used building


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construction contracts (as distinguished from those for public works or other types of improvements such as solar or wind energy facilities) are those published by the American Institute of Architects. Te relevant provision in the AIA A201-2017 General Condi- tions reads: Ҥ 8.3.1 If the Contractor is delayed at


any time in the commencement or progress of the Work by … (3) unusual delay in deliveries,… or other causes beyond the Contractor’s control; … or (5) by 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.” Note that the language describes


the impacts on the contractor, not its subcontractors or suppliers. In typical larger building construction projects, almost all of the work is performed by subcontractors who purchase materials and equipment and employee labor.


Maintain Detailed Records Although common sense may


dictate that anticipated labor and material shortages are causes beyond a contractor’s control, this is not the case


www.AGC-CA.org


hat are the implications of material supply chain disruptions and labor


since the contractor is in the business of assuming the risk of subcontractor performance and must attempt to engage a replacement, either due to the subcontractor’s default or due to the subcontractor invoking a force majeure provision in its subcontract. Te contractor is likely to have the burden of showing that it either made a reasonable attempt to find replacement subs or provide evidence that such an attempt would have been futile. Tat means that contractors should


document communications with subcontractors regarding staffing and the extent to which their employees show up on the job. Contractors and subcontractors should maintain detailed records of the sources of any shortages of labor, materials and equipment, the impacts of such shortages on construction progress and any attempts to mitigate. A subcon- tractor facing the unavailability of specified materials or equipment may attempt to mitigate with substitutes that are available. It is likely, however, that courts


would examine the owner’s reason- ableness in fulfilling its common law duty to attempt to mitigate its damages. In addition, many states have either by statute or precedence doctrines that recognize that a party whose performance is prevented by factors not under its control are entitled at least to an extension of the contractual time for performance. In view of the evolving governmental regulations permitting ongoing construction activity under health-risk mitigation protocols, it may be difficult for a contractor to convince a court that the contractor should not bear the risk of the recent changes in work condi- tions that have impaired productivity


Other contract forms published


by prominent trade groups explicitly identify epidemics as a basis for force majeure extensions. Te Design-Build Institute of America’s Document No. 535, “Standard Form of General Condi- tions of Contract Between Owner and Design-Builder,” defines Force Majeure events entitling a design-builder to an extension of the contract time as “those events that are beyond the control of both design-builder and owner, including the events of epidemics, … and other acts of God.” Te ConsensusDocs General


Conditions also has a broad definition of force majeure events entitling the “constructor” to an extension of time, specifically referencing epidemics. (ConsensusDocs 200 2019 Sec. 6.3.1) Under the AIA A201-2017 General


Conditions, the contractor has the burden of proof in asserting a claim for an extension of time. Notice of a claim must be given within 21 days after the “occurrence of the event” (§15.1.3.1) and must be accompanied by an estimate of cost and of probable effect of delay on progress of the work, and in the case of continuing delay only one claim must be made (§15.1.6.1).


Language Used to Describe Delay Is Key


Among the provisions in a contract


that will result in different results in terms of entitlement to a time extension, is the language used to describe the delay. Te AIA language refers to a delay in the “progress of the work.” Tis provision is sometimes modified to require the contractor to show critical path delay or even delay in substantial completion. If the contractor is only entitled to an extension of contract time if a


Continued on page 22 Associated General Contractors of California 21


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