The Pandemic and Construction Contracts
In today’s state of the economy as a result of the pandemic that affects the whole world, contractors have to ensure that the construction contract and its contractual terms properly address the concerns they might encounter during these trying times.
While there is always the hope that the economy and the people’s way of life will go back to normal soon, for now, only uncertainties linger in the air. This is why it is crucial for contractors to pay close attention to all the clauses in a proposed agreement for construction and make the necessary revisions to keep their company protected at all times.
Although many of these contracts contain force majeure provisions, going through these provisions again usually reveals that they don’t really include situations such as the pandemic like what is happening right now.
For this reason, it is recommended to insert unambiguous language that will make pandemic qualified as a type of force majeure event. If such revision is absent, one party involved in the contract might become accountable for any delay in the completion of the contract that might make subjected to liquidated damages as well as other penalties indicated in the agreement.
Also, it is important to pay close attention to excusable delay that is not within the control of the contractor when deciding the schedule of the construction. Obviously, the type of delay that is easiest to address is if the state halted all construction activities except those emergency construction activities.
Meanwhile, the contractor should know that there is a possibility of significant delay in inspections and permitting when the construction resumes. Several projects that start simultaneously will probably be overwhelming for the local or state officials. For this reason, the contractor must be careful to make sure that the contract offers the correct allowance for this delay that is not its fault and not within its control because of the present situation. The allowance must carry over and lead to a change to the scheduled date of completion to avoid liquidated damages or any other forms of damages.
The last and probably the most important is for the contractor to pay close attention to financial viability of the entity or company that it performs the construction services for, either after or during the pandemic.
When you are the contractor, you can never let the owner disappear in front of you or you might have a hard time collecting your payment. Also, if a contractor maintains better control over its receivables, there is a higher chance for the project to become profitable once it nears its completion. It is specifically crucial after or during this pandemic as the finances of an owner will probably be stretched too thin with the financing probably pulled by the bank as the project is ongoing.
The pandemic will result to more future concerns and construction contractors need to be more careful than ever to protect themselves. Consult with the legal experts to help you draft a contract that works in your favor and is fair to the other party or parties involved.