Wash Your Hands and Read Your Contract: COVID-19 Reminders for the Construction Industry

Snell & Wilmer
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Snell & WilmerA year into the pandemic, many of us are reflecting on how far we have come. While we may laugh at the memory of wiping off grocery bags with Clorox, some of the lessons, like washing your hands for at least 20 seconds, are fundamentals that should apply all the time.

The construction industry has learned similar lessons. While there are some early trends from the pandemic that are unlikely to repeat, we have also been reminded of best practices during a project. For example, after the attention given to it during the pandemic, a force majeure clause should be reviewed/revised before signing the contract on future jobs. In addition, owners and contractors should consider becoming more familiar with their contract and applicable law with respect to any project. Just like washing your hands, understanding your contract and applicable law can help fend off problems that could make you sick. To help guide your review, below are three sections you should consider ensuring you, and your team, are familiar with:

  • Dispute Resolution – some contracts prescribe a thorough process for resolving disputes (e.g. requiring AAA arbitration governed by certain rules), while others may be silent and allow the parties to proceed directly to court. With the potential increase in disputes based on COVID-19’s impacts, you may want to understand what your contract calls for and if any applicable law trumps what is in your contract. It may perhaps require that you have direct discussions and/or mediate within a set amount of time or file a claim in a certain jurisdiction. If you fail to follow its requirements before filing a lawsuit, you could hand the other side another argument for a motion to dismiss your complaint.
  • Termination – owners may want to be familiar with their rights to stop work on their building, for convenience or with cause, and contractors may want to know when they can leave a project without breaching the contract. These are important issues and parties may want to consult with knowledgeable construction counsel before making a decision. For example, if an owner decides to cancel a project because COVID-19 means the office space is no longer needed, the owner may want to know what they still need to pay if they stop work on a project. Likewise, contractors may want to know what costs they can collect for in that scenario. If problems arise with the contractor’s work or schedule because of COVID-19 or otherwise, the parties should consider evaluating their rights and remedies.
  • Integration and Modification – perhaps even more important than what the contract originally said is what it currently says. All parties may want to understand how the contract can be changed in a way that binds the parties. This can be important especially when looking back at the early days of COVID-19. It is possible that someone on a team sent an email explaining a desired change to the project. However, the contract may set forth that changes can only be made via some other formal process, or by some other decision maker within the company.\

Without diminishing the importance of the project’s plans or schedule, generally it is the contract and applicable law that governs how money flows between the owner and contractor. Owners and contractors spend significant time negotiating the contract’s terms, and it’s generally worth the relevant project team members’ time to understand the terms of the contract, and applicable law affecting the contract terms. Failing to invest the time could leave everyone involved in the project sick.

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