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Force Majeure and Spiking Lumber Prices

Rhode Island

I have a fixed price construction project with a builder that was signed on 1/20/20 and the construction loan closed on 2/28/20. The loan has a force majeure clause in it. The builder is attempting to replace the existing contract with a new Cost Plus contract. We refused to sign that and the builder has now halted framing until lumber prices come down citing the Corona virus pandemic. Does the builder have any legal footing to cause a delay due to this?

3 replies

Sep 10, 2020
A force majeure clause\ can be a critical safety net to help contractors deal with unforeseen events. The clause is a type of contractual provision that relieves a party's obligations under contract when circumstances beyond the party's control arises. These provisions are meant to cover events traditionally deemed as "acts of God." A general force majeure clause will states that when an event arises, that is out of parties' control, that materially affects performance, and wasn't reasonably foreseeable; performance may be excused or extended. The more specific clauses will list several different "triggering events" that may give rise to an excusal of performance. In regards to the Coronavirus pandemic, may contractors will be forced to rely on these provisions. Under the AIA clause however, coronavirus would likely have to be legitimized by the catch-all phrase, "other causes that the Contractor asserts, and the Architect determines, justify delay." In the event that a force majeure clause is invoked as a result of the coronavirus, the contractor would be entitled to more time to complete performance, but the contract would not provide for additional funding for salary, overhead, or other daily operating costs. Keep in mind, whether the coronavirus constitutes a force majeure event will come down to the terms and language contained in the contract. Dealing with disease and outbreak is atypical considering there isn't much case law on the matter. Ultimately, a majority of US Courts will likely deem that any construction delay caused by the COVID-19 pandemic as way beyond the "reasonable control of the parties", and consider it covered under the most general force majeure clauses. Be sure to review these provisions and understand your rights, remedies, and any notice requirements under the clause. A Rhode Island construction attorney will likely be helpful to you in examining your construction contract: Find the Best Rhode Island Construction Lawyers
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Sep 10, 2020
Thank for the reply. He is not unable to perform the work just unwilling to pay the increased price of lumber which is a cause of supply and demand, tarrifs on Candian Lumber. Coronavirus is one of a multitude of factors impacting this. Based on my readings elsewhere I would assume he can't delay.
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Sep 10, 2020
There was a post uploaded last week in response to the National Lumber shortage that is driving up the cost. You might find this post helpful when moving forward. In addition, you can also contact a Rhode Island Construction Lawyer that can lay out how to proceed. Good luck!
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