We are a subcontractor in negotiations with our subcontract.
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Mar 18, 2020
Force majeure clauses and delay provisions have become even more important in the face of this coronavirus outbreak, as discussed in this article: Coronavirus & Construction: Does your contract allow for delay under force majeure?
A well-written force majeure clause will ensure that your contract accounts for the possibility that the project might suffer from unsolvable problems created by the COVID-19. With this pandemic, it's easy to foresee situations where the contract can't be completed, as agreed upon. Things like staffing the job, obtaining necessary materials or equipment, and even having inspections and permits done could become impossible.
Those issues might not totally prevent the job from moving forward, but they'll certainly cause delays in the normal project schedule. So, drawing up a contract with carefully worded delay provisions is a good idea too. And, it may even be a good idea to specifically mention COVID-19 in the contract as a potential source of delays. The bottom line here, though, is that the contract should directly deal with the potential for delays and have a clear process for compensating and managing them.
It's even more important to have clear payment terms when coronavirus may affect the job
It's always important for payment terms to be clearly spelled out in the contract. And, it's always important for claimants to do what they can to preserve payment security rights, like mechanics lien rights and bond claim rights. But, with COVID-19 looming large, that becomes even more important.
Here are a few ideas that come to mind, and obviously some will be more practical than others.
Pay if paid and pay when paid should always be avoided, if possible, by subs and suppliers. But, that becomes even more important as the risk of nonpayment rises.
Including interest penalties for late payments can help to force a customer to pay on time. Obviously, customers won't always be willing to agree to interest penalties, though - particularly in uncertain times.
Having terms that allow for billing remobilization costs could be valuable, too. If the job is suspended at some point, starting that job back up could be costly and cut into profits. And, allowing to bill remobilization costs could really help.
Impossibility of performance should be front of mind, too. Even if there isn't a force majeure clause, or even if the force majeure clause doesn't apply, the work becoming impossible could end up causing a subcontractor to not be able to complete their work. And, including specific impossibility of performance terms which contemplate the situation may be wise.
Finally, it's entirely possible that sourcing labor and materials will become more costly throughout the life of the job. And, including an escalation clause in the contract can help to ensure that rising costs don't cut into profits.
Again, this is hardly a complete list - and it's possible (if not probable) that other attorneys will have other suggestions and opinions on the matter. So, seeking out the opinions of others would be a good idea, as well!