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Contracts and COVID-19: How to make sure you’re protected when there’s a project delay

As we discussed in a previous commentary, after you have identified contract clauses that are critical to determining your rights and obligations with respect to COVID-19 caused delays, next you need to determine what these clauses actually say.

Your review should seek to answer three questions: (1) is COVID-19 an excusable delay; (2) what is the allowable timeframe to submit a delay claim; and (3) what are the required elements of a claim? Answering these questions may not be as easy as it sounds. To help you wade through the legalese, we’ll explain what to look for in the following sections.

Is COVID-19 an excusable delay?

If your contract explicitly entitles you to additional time to perform work as a result of a “worldwide pandemic”, consider yourself lucky. Most construction contracts have no clause that is quite that on point. However, the AIA, DBIA, and ConsensusDocs form contracts each afford contractors relief for delays caused by circumstances beyond their control. COVID-19 certainly falls within this broad category. If your contract does not include language along that line, look for language like “adverse governmental actions” or “government orders”, both of which provide an avenue for relief in states with a “stay at home order.” If your contract does not offer relief, have a conversation with the project owner as soon as possible to discuss the difficulties that COVID-19 presents. Many project teams have been working collaboratively to find solutions to this unprecedented problem in a way that is fair to all parties.

What is the allowable timeframe to submit the delay claim?

It is critical to know the period of time afforded to you by a contract to submit a delay claim. Although an untimely claim is better than no claim, an untimely claim gives a recipient a basis to reject an otherwise legitimate claim. Certain contracts, like ConsensusDocs agreements, have more than one deadline – 14 days to submit an initial notice of claim and 21 days after that initial notice to submit documentation supporting the claim. If your contract has more than one deadline, make sure to develop a system to track and remind you of them to ensure that your rights are preserved. If you are not able to provide information or documents within the time-period required by your contract, be sure to provide subsequent notice(s) detailing the reasons that you cannot reasonably provide that information and a revised date for when you expect to be able provide it.

What are the required elements of the claim?

As the AIA, ConsensusDocs and DBIA form contract language states, it is typically not enough to simply tell the other party that you have been delayed; proof of the delay must also be furnished. Generally speaking, the proof of delay must establish: (1) that a delay occurred; (2) the cause of the delay; and (3) the effect of the delay on the project schedule. Proof can take many forms and will vary according to the cause of a delay. However, maintaining and regularly submitting manpower logs, schedule revisions and weekly and monthly reports will be critical to proving the effect of COVID-19 on a project. Keep in mind when submitting these documents that they must accompany a formal claim – submitting a monthly report that shows that a schedule is slipping or a manpower log that shows that onsite labor has been reduced will almost certainly not be sufficient to entitle you to additional time.

According to many virologists, the only way to eradicate the COVID-19 virus is to develop an effective vaccine that is delivered to everyone. Given the time it takes to develop a vaccine and the difficulties entailed in getting it to the masses, the world will continue to be affected by the virus. Further, even if we head in to a lull over the summer, there is a chance that the virus may reappear more in the winter. The point of this is that COVID-19 is not going away any time soon. Make sure you know what your contracts say and follow the language to ensure that if you need to exercise a remedy that you bargained for, you are able to do so.

Eric Meier is a partner in Husch Blackwell’s Milwaukee office and serves as a leader of the firm’s Construction Academy team. He represents construction and business clients from contracting through litigation and every point in between.

Samantha Schacht is an attorney in Husch Blackwell’s Milwaukee office.

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