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Construction Contracts in the Age of the Pandemic

March 20, 2020

By: Michael Gibbons

As the COVID-19 virus continues to spread, developers, contractors, and subcontractors are increasingly seeing their ability to perform impacted directly or indirectly by its effects on the economy. From supply chain issues and delivery of building products from China to the health and availability of the labor workforce, performance issues are already arising. However, the construction contracts currently in place most likely do not specifically address a pandemic and its effects on a party’s ability to perform.

Given the current situation, the following question naturally arises: if a company cannot perform its contractual obligations due to COVID-19 related issues, is the performance excused or not?

Under Florida law, even if a contract does not expressly include a force majeure type clause, the “impossibility” defense to a breach of contract claim is recognized under certain circumstances. If a party’s ability to perform is rendered impossible due to an event that is beyond the party’s reasonable control and, critically, was not foreseeable at the time of contracting, then that party may assert an impossibility defense to excuse performance, regardless of whether the contract specifically addresses the issue.

Going forward after the coronavirus episode passes, a pandemic will no longer be “unforeseeable.” On the contrary, the memory of the national shutdown due to the coronavirus will last for generations.

With the occurrence of a pandemic and its profound effects on the economy and commercial actors now foreseeable, it is critical under Florida law for parties to construction contracts to expressly address and allocate the risk of such an occurrence in their contracts. In the future, if a party expects to be excused from performance of its contractual obligations due to an epidemic or pandemic, the risk of that occurrence needs to be expressly addressed in the contract and the impacted party’s performance needs to be expressly excused under such circumstances. If the contract is silent about allocating the risk of such an occurrence, Florida law will assume that the party whose performance is affected assumed the risk of such an occurrence.

If in the future you expect your performance to be excused by the occurrence of a pandemic, you need to address that risk expressly in your construction contracts moving forward. Developers, contractors, and subcontractors are well-advised to consult with legal counsel to have their contract forms reviewed to address this newly foreseeable performance risk of a pandemic.

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This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

A LEED-certified attorney, Michael Gibbons represents owners, developers, contractors, design professionals and subcontractors asserting a variety of construction claims (and defenses to such claims), including actions for breach of contract, delay, latent defects, water intrusion and mold, differing site conditions, extra work, indemnity and warranty.

Michael also counsels clients on issues related to construction claims of lien and surety bond claims and regularly represents clients in litigation and arbitration over construction claims of lien and payment and performance bond claims. 

Formerly an Assistant State Attorney, Michael tried over 65 cases through verdict ranging from battery and DUI to Armed Robbery and Felony Murder. He has tried a variety of civil cases as well, and has substantial experience litigating ADA (Americans with Disabilities Act) cases in Federal Court under Title III of the ADA where accessibility to public accommodations is at issue.

In addition to litigating design and construction related claims, Michael often represents owners, developers, design professionals, general contractors, and sub-contractors in the preparation and negotiation of design and construction contracts. His experience litigating construction claims helps Michael identify problematic and unfavorable contract language. Conversely, his experience drafting and negotiating complex construction contracts makes Michael a more informed and knowledgeable litigator when a client needs a forceful advocate on a construction contract issue. A clearly expressed allocation of commercial risks, rights and liabilities is essential to a good design or construction contract and critical for reducing the risk of later claims.

Accredited by the Green Building Certification Institute as a LEED (Leadership in Energy and Environmental Design) Green Associate, Michael is a frequent speaker and author on the subject of managing risks in sustainable design and construction contracts. He has significant experience drafting and negotiating design and construction contracts incorporating sustainability principles including LEED standards.

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