Force Majeure, Commercial Impracticability, and Frustration of Purpose

The outbreak of COVID-19 has been one of the most disruptive events to the global economy in recent memory. Businesses across every sector of the economy are scrambling to determine the legal repercussions of government travel restrictions, labor shortages, supply chain interruptions, financing impacts, and market price fluctuations triggered by the pandemic. How can I possibly be expected to perform my maintenance contract if the government orders me to stay home? Am I still liable for liquidated damages if I don’t meet the contractual milestones in my construction schedule? Do I still have to pay my purchase orders for kitchen supplies and foodstuffs if the government has shut down all restaurants indefinitely? These, and other questions like it, loom large in the wake of the current pandemic.

With this survey, we attempt to shed some light on the answers to these questions and educate readers about the history and status of what we call “legal excusability” in the United States, the District of Columbia, and the US Territories. When we say “legal excusability,” we specifically refer to situations where intervening events delay or outright prevent one party from performing its obligations under a contract. In American jurisprudence, the law of excusability is derived from three authorities—the language of contracts, the common law, and legislative provisions excusing performance. Attorneys from Seyfarth Shaw’s commercial litigation, construction, and government contracts practice groups have undertaken a comprehensive review of these concepts in every American jurisdiction, analyzed what we found, and summarized our findings in the pages below. While we certainly don’t claim to have all the answers to the difficult questions that businesses face during these trying times, our goal is to provide the legal building blocks to aid contractors that may have a viable claim of legal excusability. We hope you find it informative.

Request a copy of the 50 State Survey of Legal Excusability: Force Majeure, Commercial Impracticability, and Frustration of Purpose

While the global economy grinds to a halt over spread of the novel coronavirus (COVID-19) and people disband amidst calls for “social distancing,” these are uncertain times to say the least. Stay safe out there, we will get through this. While the health and welfare of our loved ones and the general public becomes the primary focus, federal contractors and subcontractors face a secondary and yet critical concern—how to address the impacts from COVID-19, which include labor disruptions, supply chain shortages, facility closures, remote work environments and government-mandated restrictions that make it difficult, if not impossible, to move programs and projects forward.

A recent decision by the Civilian Board of Contract Appeals (“CBCA”) related to an epidemic makes clear that whether or not a contractor will prevail in recovering costs associated with COVID-19 is going to be dependent on the specific contract provisions the parties have negotiated in their contracts. Continue Reading Civilian Board of Contract Appeals Decision Provides Guidance to Contractors Seeking to Recover Additional Costs Due to COVID-19

On Wednesday, June 3, at 1:00 p.m. Eastern, Seyfarth partners David Blake, James Newland, and Leah Rochwarg are presenting “Construction Challenges During COVID-19: Suspensions, Delays, Workforce Depletion, and Other Considerations,” a 90-minute CLE webinar for Strafford. The webinar will address the impact of COVID-19 on private and federal construction projects and the legal implications that may arise from business interruptions due to restricted supply chains and a depleted workforce. The panel will further address how to proactively handle prospective construction delays, suspensions and inefficiencies.

For more information and to register, visit the Strafford website.

Seyfarth partner James Newland moderated “COVID-19’s Impact on Construction Projects,” a webinar in the Airport Construction Strategy Webinar Series. Airports Council International North America, Airport Consultants Council, and the Associated General Contractors of America teamed up to transform the Airport Construction Strategy Summit into a webinar series to help airport owners, design and engineering professionals, and the contractor community discuss how to deliver better projects together, even in the COVID-19 era.

The next webinars in the series are scheduled for May 12 and May 26. Find more information here.

For projects that involve excavation or foundation work, even the most diligent pre-bid site survey may not fully inform the contractor of what conditions to expect below the surface. The risks of encountering unforeseen subsurface conditions are so high that, rather than encouraging bidders to include large contingencies in their proposals, construction lawyers have drafted a special clause—the Differing Site Conditions clause. The purpose of the Differing Site Conditions clause is to allocate the risk for conflicting, inaccurate, or incomplete pre-bid information furnished by the project owner. While the Differing Site Conditions Clause should, in theory, be a pile driver’s closest ally, recent cases interpreting this clause highlight some of the challenges to prosecuting claims under this provision. Continue Reading What Lies Beneath (And Who Pays for It?): Common Issues Arising Under the Differing Site Conditions Clause

The 2019 novel coronavirus and the disease it causes (“COVID-19”) is changing the landscape of construction projects across the country. COVID-19 orders from governors and other public officials are impacting projects by requiring new health initiatives, such as social distancing and the use of personal protective equipment, requiring residents to stay at home and self-quarantine if they cross state lines, and in some regions shutting down projects completely. The pandemic is squeezing supply chains, creating the possibility of late deliveries and price escalation as buyers compete for diminishing resources. As the economy hibernates while individuals shelter in place, funding sources for construction financing are diminishing, posing risks to new and ongoing projects. These issues create risks of delay, labor inefficiency, price escalation, nonpayment, and construction workers and on-site owner personnel becoming sick, among others. This COVID-19 Playbook discusses rights, remedies and steps to consider under AIA® Document A201™ – 2017 (“A201”) so you can put yourself in the best position to shape the outcome you need in light of the pandemic.

Download the A201 Playbook for COVID-19: Avoiding Pitfalls and Mitigating Risk on Construction Projects

To help airport owners, design and engineering professionals, and the contractor community, ACI-NA, ACC, and AGC have teamed up to transform our Airport Construction Strategy Summit into a webinar series that is taking place April 14, April 28, May 12, and May 26. The COVID-19 pandemic has impacted a range of critical elements of project and program management, including project justification and scope, project schedules, and the very ways design and construction work gets done. The webinar series will provide perspectives from airport owners, designers, and contractors regarding how they are adapting their construction and development programs and practices in light of the COVID-19 pandemic.

On Tuesday, April 14 at 3:30 p.m. Eastern, Seyfarth partner James Newland is on the panel for the first webinar, Airport Construction Site Continuity during the COVID-19 Pandemic. More information and registration is available at the Associated General Contractors of America, the Airports Council International – North America, and the Airport Consultants Council websites.

Owners and contractors trying to understand the full impact of COVID-19 on their projects are likely turning to delay[1] or force majeure provisions in their construction contracts to assess their rights or liabilities for continued performance. An event of force majeure is a circumstance that prevents someone from fulfilling a contract, and many articles recently have been written addressing the contours of typical force majeure clauses. Continue Reading Temporary Impracticality or Frustration of Construction Contracts During the COVID-19 Pandemic

This webinar provides a practical review of the impacts of COVID-19 on public and private construction contracts. Coverage includes the clauses covering delay, impact, acceleration, suspension of the work, changes and termination, whether express or constructive. The program focuses on the practical aspects of how best to manage the current situation, notice requirements, documenting claims, and consideration of risk management practices.

Wednesday, April 1, 2020
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Speakers
James Newland, Partner at Seyfarth Shaw
David Blake, Partner at Seyfarth Shaw
Leah Rochwarg, Partner at Seyfarth Shaw

Register Here

*CLE Credit for this webinar is approved in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Credit will be applied for, but cannot be guaranteed, in all other eligible jurisdictions. Please note that in order to receive full credit for attending each webinar, the registrant must be present for the entire session.

On Wednesday, March 25, 2020, Seyfarth attorneys Sara Beiro Farabow and Teddie Arnold will present in an 8-part webinar hosted by the Association of General Contractors, which will include a discussion of various topics salient to the outbreak of the COVID-19 virus. The webinar is titled, Navigating the Outbreak, Part III: The Contractual and Related Legal Protections and Risks for Construction Companies and will commence at 2:00 p.m. EDT. This webinar will identify the facts that you need to establish in order to qualify for the relief that a typical force majeure clause, how to give timely notice and still retain the flexibility to respond to rapidly changing events, and how owners are likely to treat claims for additional time, money or both, including claims for extended home office overhead or acceleration. You will also learn about the practical strategies that companies are implementing and the proactive steps they are taking to deal with potential price escalations.  

To register for the webinar, please visit: https://na.eventscloud.com/ereg/index.php?eventid=537770&.