Force Majeure Contract Clause

Force MajeureAn article on Constructiondive.com broke down how the force majeure contract clause in construction contracts can help plan for the unexpected.

Per the article “Anyone in the construction business can attest to the fact that it’s an industry that defines the phrase “stuff happens.” And most of the time, there is someone to blame. Inconsistencies between versions of the plans and specifications; late ordering of long-lead-time specialty items; failure on the part of a subcontractor to adequately allocate resources; mathematical mistakes in the original estimate — all of these can lead to delays in the schedule and higher costs. These are also the result of human error, so each step in the decision-making process that led to the mistake can be evaluated and corrected for the future. But then there are those events no one could have anticipated, and these happenings fall under the category of force majeure — bringing a whole new set of contract-related questions that all parties must address.”

“A force majeure event is one that could not have been reasonably foreseen and keeps a contractor from fulfilling their obligations under the original terms of the contract.”

“The American Institute of Architects refers to these unanticipated occurrences in its A201-2017 General Conditions for the Contract of Construction,  which is incorporated by reference into many AIA contract agreement forms.  ConsensusDocs also mentions these events in some of its contract documents, including the ConsensusDocs 200 Agreement and General Conditions Between Owner and Constructor.”

“Force majeure clauses are intended to spread the risk of the types of things you can’t control,” said John Patrick Curran, partner at Sive, Paget & Riesel in New York. ”If work is suspended for a delay, the contractor is excused in the sense that they don’t have to maintain the schedule. The owner is excused [from] paying for work for a period of time.”

“The AIA 201 lists fire, weather, unusual delivery delays and labor disagreements as examples of events that would be out of the contractor’s control, while ConsensusDocs 200 throws in terrorism, epidemics, “adverse governmental actions” and unavoidable accidents. Both allow, as Curran said, for an extension of time to the contract if requested in a timely fashion by the contractor.”

“But what about financial compensation for costs like overhead or remobilization associated with those delays? “It all depends on what the contract says,” Curran said. Many owners write “no damage for delays” clauses into their contracts, he said, which means there is no allowance for any cost reimbursement in the event of, for example, heavier-than-average rainfall that makes it impossible to carry out site work — only an increase in the allotted schedule time.”

The article goes on to give examples and explain the gray area in the clause.  Click HERE to read the full article.