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Assessing COVID-19 Remedies Under Construction Contracts

coronavirus and construction contracts

Dealing with coronavirus and construction Contracts

Property owners and construction contractors who are involved in construction projects have both been impacted by the COVID-19 pandemic. As the novel coronavirus has swept across Florida, it has disrupted contracts and will likely continue to do so until a vaccine is discovered. While contract delays should be expected, how the responsibility might be allocated between contracting parties will depend on the contractual language. Some parties may be relieved from having to perform their duties under a contract by the inclusion of force majeure clauses. Other contracts might include provisions that outline the available remedies for delays. If the pandemic makes a contract impossible to perform, a party may be able to avoid its performance. Because of the special impact that the coronavirus is having on contracts, contracting parties may benefit from talking to a Florida construction lawyer about coronavirus and construction contracts. Here are some other remedies contracting parties might want to be aware of during the pandemic.

Asking property owners for financial assurance

One issue caused by coronavirus and construction contracts is the impact that the pandemic has had on the financial ability of people to continue paying their obligations. While a property owner might have been financially secure at the time he or she contracted with a general contractor, his or her financial situation may have been harmed by the economic impact of the pandemic. 

Insist upon a contract provision obligating the property owner to provide you with evidence that they have made financial arrangements to pay for the contracted work before the work begins. This obligation can be extended to include a requirement for owners to provide evidence that they still have the financial ability to pay after the work begins if certain conditions occur. If the contractor has a reasonable concern that the property owner will be financially unable to pay the contractor at the time that the payments are due, the contractor should send a request to the property owner in writing asking for evidence. 

If the property owner secured construction loans based on his or her financial condition and creditworthiness before the pandemic, he or she may no longer be in a good financial position because of the economic downturn. Asking the property owner to present evidence of his or her ongoing ability to make payments is a good way for contractors to protect themselves from further losses if a property owner is no longer able to meet his or her obligations. The contractor can then immediately stop the work, ask for the stoppage time in the contract to be extended, and add the costs incurred by the contractor because of the delay and stoppage to the sum owed under the contract.

Material and supply problems

Both owners and contractors may encounter material and supply problems when they are dealing with the coronavirus and construction contracts. While a construction contract might call for specific materials to be used, there have been multiple interruptions in the supply chain since the start of the pandemic. This means that the contractors might be unable to secure the materials that are called for under the contract within the contracted time. Owners that have a strict time frame may need to be flexible and allow other materials to be substituted. Contractors should plan for additional sources of materials and labor. Before a project begins, owners might also want to obtain performance and payment bonds to protect themselves if the contractors are unable to perform so that the risk will be shifted away from them to the surety.

Changes

Contractors are generally only entitled to additional sums under a contract or an extension of the time under certain conditions. The money called for in the contract can generally only be adjusted if there are changes in the work that could not reasonably have been inferred from the design called for in the contract or from damages caused by a delay. 

However, when looking at the coronavirus and construction contracts, it seems unlikely that the pandemic would entitle a contractor to secure more money under a contract or damages caused by a delay. Because of the heightened risk posed by COVID-19, contractors should include added economic protections in their contracts, including increased fees or contingency sums that the contractor can use in the event of delays or other related problems during the pandemic.

Addressing safety concerns

Contractors will need to ensure that they are addressing safety concerns during the pandemic. They will need to follow the recommendations of public authorities in terms of the number of workers on construction sites and ways to protect their workers. Contractors should implement safety measures to protect everyone onsite, including physical distancing, PPE, and others.

Get help from a Florida construction lawyer

Owners and construction contractors may benefit from consulting with an experienced Florida construction lawyer for the language to include in their contracts to provide the greatest degree of protection during the coronavirus pandemic. A lawyer at the law firm of Jonathan P. Cohen P.A. can review contracts, negotiate terms, draft contracts, and represent clients to protect their interests. Contact us today to schedule a consultation in Ft. Lauderdale by calling us at (954) 462-8850.