Coronavirus and Construction Project Delays

The rapid spread of the novel coronavirus is, at least within the last century, an unprecedented event.  Few segments of the economy have been spared the impact that the pandemic has had and will continue to have on business and productivity.  The impact will likely be the most profound for those industries that cannot count on business continuity through “telecommuting,” but instead depend on labor and materials being available at a particular place at a particular time.  We have all heard the phrase time is money, and for few industries is that truer than the construction industry.  Project delays are expensive, and when labor or materials become scarce or projects are shut down, someone has to bear that cost.  When time is of the essence for performance under a contract, the circumstances under which delayed performance will be excused are largely dependent upon the language of the contract.

The doctrine of force majeure is a common law principle that generally excuses the non-performance of a party to a contract when performance has been made impossible due to certain events beyond that party’s control.  Translated literally, force majeure means greater force, and although it is commonly referred to as an Act of God, it can mean any number of causes that make performance impossible.  In the context of a construction contract, force majeure is typically listed among the causes that would constitute excusable delay.  The language is boilerplate in every industry-standard form of agreement, and because of its pervasiveness, and the infrequency with which it is invoked, it is typically given little attention and may even be taken for granted.  Despite its ubiquity, however, force majeure has no formally recognized definition under the law of most jurisdictions, including New York.  While the parties to a contract may understand that force majeure constitutes an excusable cause of delay, there is no universal consensus as to what constitutes a force majeure.  The doctrine of impossibility of performance generally “excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible.”  Kel Kim Corp. v. Central Mkts., 542 N.Y.S. 2d 384, 385 (1987).  The inclusion of a force majeure clause in a contract may do little to expand that principle, since New York courts will typically excuse non-performance “only if the force majeure clause specifically includes the event that actually prevents a party’s performance.” Id.

Global supply chains have already been profoundly impacted by the virus, and in some areas, whether due to quarantine, containment, illness, or concerns for employee safety, labor may become scarce, or employers may feel compelled to shut projects down.  The spread of the novel coronavirus may make timely or continued contract performance impractical or inadvisable, but it is unlikely to make performance impossible.  At what point, however, does delay in performance due to the virus become excusable?  This pandemic is unprecedented, both practically and legally.  There is no clear authority on the effect of a pandemic in the context of impossibility of performance or excusable contract delay or default.  Under current circumstances, the language of the contract becomes even more important, since the party experiencing the delay may have to look for defenses other than force majeure that might excuse the delay.