Navigating Business Through a Global Pandemic – More Advice for Contractors

Navigating Business Through a Global Pandemic – More Advice for Contractors

Stuart M. Detsky and Victor A. Bandiera

In our last article we provided advice for contractors in order to minimize the impact of the pandemic on existing
projects. In this article, we will provide advice to contractors who are intending to bid new work and/or enter into new
contracts for construction or service projects.

FORCE MAJEURE IS NOT THE ANSWER

While contractors are certainly getting legal advice about force majeure clauses and how they may assist with
ongoing projects, these clauses are not going to be very useful for new projects. The main concept that guides
force majeure clauses is that the circumstance that triggers the clause is “unforeseen”. Considering the worldwide
prevalence of COVID-19 and the many steps governments have taken to combat the spread of the virus, no one will
be able to argue that potential future impacts to a construction project are unforeseen or unanticipated. Therefore,
contractors must take different steps to protect themselves.

NO “GET OUT OF JAIL FREE” CARD

While open and honest negotiation will result in fair contractual language, contractors should not expect that impacts
of the pandemic will allow the contractor to be relieved of their obligations. As stated above, arguments relating to
force majeure or related concepts such as contract frustration are highly unlikely to be successful for new contracts,
based on standard contract language.

There is no one perfect clause that could be inserted into a contract (or into a surety bond) that will discharge the
contractor or negate any potential default allegation. Contractors should not expect their lawyers, advisors, brokers,
lenders or surety companies to have a simple paragraph that will solve all their potential problems. It is also doubtful
an Owner would accept just a one-sided amendment. Only by taking a proactive and comprehensive approach to
new contracts can a contractor best protect itself. To avoid potential disputes the parties should prepare a project
risk matrix, so the parties understand the risks and responsibilities.

ANTICIPATION OF IMPACTS

While some potential impacts of the pandemic are far-reaching and across the board (such as the Quebec
government’s three-week shutdown of most non essential construction projects) many others will be specific to the
region the project is located, the type of work to be performed, the labour, material and subcontractors required to
complete the work, the cashflow required to finance the work and the anticipated duration of the work. Contractors

must review all the potential impacts when determining their price and proposed schedule for the work and
especially if they will be providing a fixed price (for the entire project or for unit prices) with set completion dates.
Contractors must review the proposed contract form from the owner and analyze how such impacts are dealt with in
the language of the contract. Before a tender closing, it is critical for contractors to ask an owner or its representative
the right questions in order to have clarity on how the owner and