Higher education institutions with construction projects in progress, or contemplating new projects, could face disruptions to those projects due to COVID-19. Higher education projects, like student housing, are particularly sensitive to timely delivery dates. Apportioning the impact between the university and its contractor will depend on the particular contract language and specific circumstances affecting performance. The pandemic could potentially trigger numerous standard contract clauses. These include delay clauses, force majeure clauses and suspension or termination for convenience clauses. A brief discussion of these may help colleges and universities and their contractors navigate this largely unprecedented event.
Delay clauses may provide for damages to the contractor in the event of a delay that is determined not to be the contractor’s fault. Many times, the concept of delay and force majeure are combined within the contract structure. In this article, they will be discussed together.
Delay clauses are typically only applicable for specific, enumerated events. Some commercial forms cite epidemics as a cause for an excused delay. Others do not. Most, if not all, include a broad category for “anything beyond the contractor’s control” as grounds for an excused delay. Some contracts also will provide for excused delays for actions of the owner. Each of these could be applicable to the current pandemic.
Outside of the construction context, courts have addressed claims of delay due to an epidemic, but most cases analyzed contracts specifically providing epidemics as an excused delay. Even then, courts have been rather strict in the evidence required to link the epidemic to the delay. What is clear is that the epidemic, or in this case the pandemic, itself is not enough to claim delay. A direct causal link must be established. Where the contract does not specifically reference an epidemic, expect contractors to seek use of the general “beyond contractor’s control” clause. To our knowledge, there are no cases directly on point applying a pandemic to such clause in a construction contract.
On a similar note, colleges and universities too would need good cause to exclude a contractor from a construction site due to general pandemic fears. Absent an applicable executive order, universities can expect contractors to claim an owner-induced delay if excluded from the site. Universities will also want to consider the enforceability of any clauses excluding damages for delays. No damage for delay clauses are subject to challenges for numerous reasons. One such reason is if the delay was of a kind not contemplated by the parties. Absent specific language in regard to disease, epidemic or pandemic, this general rule of interpretation could come into play for colleges and universities facing COVID-19 delays. Finally, many state laws prohibit or limit no damage for delay clauses.
Many university contracts will also afford the right to suspend or terminate for convenience. Depending on the contract language, the status of the project and the continued trajectory of the pandemic, this may be an option worth exploring. Whatever decision is made, universities must be cognizant of notice requirements in their contracts.
COVID-19 is shaping up to be the worst pandemic in 100 years. Despite this, neither contractors nor universities can simply rely on the pandemic itself to amount to an excused delay. It is imperative to establish a direct cause between the disease and the delay in order to prevail. Contactors will be documenting the causation. To help protect themselves from the impact of coronavirus, universities should also track the virus’s specific impact on the project. Universities should also seek early legal guidance to understand their options under their specific contract structure.