Contractors and Subcontractors – What Does COVID-19 Mean for Your Contracts?

We suddenly find ourselves in a much different business atmosphere in April of 2020.  Much of what we are experiencing is, of course, uncharted territory.  The COVID-19 precautions and shutdowns are likely to impact every industry and area of the economy in a different way.  Many contractors and subcontractors in the construction industry are wondering, how does this affect my contracts?

Generally speaking, most contracts throughout the construction industry are unaffected by the current state of things.  While different Federal and state orders may impact how many industries are operating and what they can and cannot enforce, those orders currently do not extend to general contracts such as construction contracts.  Deadlines, rates, pricing and so forth are not adjusted or alleviated because of COVID-19 precautions or economic impacts.  As a result, contractors need to review their contracts and make sure to account for different impacts that may arise because of the COVID-19 shutdowns and impacts.  For example, should materials prices or labor availability fluctuate over the next few months, contractors and subcontractors need to be prepared to deal with the ramifications of these changes, because the contract’s general terms will likely still be enforceable.

That said, there may be seldom used clauses in contracts that may come in to play over the next few months.  Force majeure clauses are found in many contracts (in another article I explain force majeure clauses in more detail).  The prepared contractor will want to be familiar with the contract language and identify the enumerated events that could trigger the contract’s force majeure clause if there is one.  Many contracts also often include provisions for increased cost of supplies, shortage of supplies or labor, and such other components that may alleviate liability if a project does not progress as planned.  But absent an applicable contractual provision, contractors and subcontractors should be aware that they may likely be held to the contractual provisions during this time.

If you have any questions about this article, please contact us at (801) 365-1030.