By: Lane F. Kelman and Matthew R. Skaroff
The impact of the global outbreak of coronavirus (COVID-19) has become widespread in the United States over the past two weeks. As of 12:01 AM on March 21, 2020, Pennsylvania will begin enforcing a ban on all construction activity located within the Commonwealth with limited exceptions This immediate, indefinite stoppage of work will be one of many impacts we are likely to see on Pennsylvania construction projects, alongside inefficiencies, additional delays, and supply and workforce shortages.
Whether you are a developer, contractor, or subcontractor, you should take immediate steps to determine how your jobs will be affected and how to protect yourselves. One of the most important things to do is undertake a thorough review of your construction contracts and devise a strategy for addressing the time- and cost-impacts on each project, based on your contract provisions and legal rights.
In reviewing your contracts, you should identify clauses that may apply, including:
- No-damage-for-delay clauses
- Notice requirements for delay and cost impacts
- Work suspension clauses
- Price escalation clauses
- Any other provisions that provide relief for time and cost impacts
Most significantly, you should determine whether your contracts contain “force majeure” (“superior force”) language that provides relief when performance is affected by “Acts of God,” such as a global pandemic.
These force majeure clauses can vary significantly in how they operate and the relief they offer. Some allow for termination, suspension of work, and price escalation when there are unexpected events. Some require agreement by both parties. Some explicitly put the risk of “Acts of God” on one party. It is vital that you identify any force majeure language or clauses in your contracts (along with all other significant delay-related clauses) and determine how they operate, and what they cover or don’t. Getting command of these clauses will help determine a strategy for minimizing cost impacts arising.
While every construction project is unique, nearly all active projects in Pennsylvania and those in the near-future will be impacted by the virus. The key to protecting yourself is having command of the contract provisions that may apply and strategizing how to best protect yourself based on your legal and contractual rights. We hope that you stay healthy and can continue to work through this unclear time. If you have any concerns about the impact of the coronavirus pandemic on your business, please contact Lane Kelman at lkelman@cohenseglias.com or 267.238.4728 and Matthew Skaroff at mskaroff@cohenseglias.com or 267.238.4717.
