The Implications of COVID-19 on Construction Projects

Posted Apr 30th, 2020 in Current Issues

The Implications of COVID-19 on Construction Projects Governed Under CCDC-2: An Architect’s Perspective
Kevin Emrich, B.E.S., B.Arch.

The COVID-19 pandemic is affecting market sectors throughout the world and construction is no exception. Projects currently in the construction stage will undoubtedly be impacted in ways which have yet to be fully realized. But how do the standard clauses in CCDC-2 address situations such as this, and how can Owners of construction projects navigate the inevitable implications ahead of them?

From a legal perspective, the issue at hand is ‘force majeure’ – a situation of adverse events that are unanticipated and beyond the control of the contracting parties, and which are not the result of any fault or negligence of the party seeking relief. Common force majeure events include fire, civil disturbances, legislative changes, common carrier delays, acts of war, extreme acts of weather, acts of God etc.

In the ongoing event of the COVID-19 pandemic, it can be expected that Contractors presently constructing projects may elect to submit a claim for relief due to related extreme and unforeseen circumstances. Time and cost delays may seem inevitable.

For parties using CCDC-2 as the form of Contract for a given construction project, it should be noted that CCDC-2 nowhere employs the words ‘force majeure’, nor does it fully define this term. However, the implications of force majeure events are addressed in CCDC-2 within General Condition ‘GC6.5 DELAYS’ therein.

GC6.5 DELAYS acknowledges delays to work, and ascribes agreed-upon means through them. The cause of the delay is the first mechanism for determining related contractual implications. GC6.5 categorizes contract delays into only three varieties:

6.5.1 Delays to the Work by an action or omission of the Owner, Consultant or anyone employed by them

6.5.2 Delays to the Work by a stop work order issued by an Authority Having Jurisdiction that was not the result of an act or fault of the Contractor 6.5.3 Delays to the Work caused by: .1 labour disputes and strikes .2 fire, unusual delay by common carrier .3 abnormally adverse weather conditions .4 any other cause beyond the Contractor’s control [other than one resulting from a breach of Contract by the Contractor]

The legal implications of each type of delay are noted clearly within GC 6.5. Delays falling into either 6.5.1 or 6.5.2 [which are not a result of the Contractor’s performance] provide the Contractor with the right to submit a claim for additional time and additional money to offset reasonably incurred expenses.

The legal implications of 6.5.3., however, are quite different. This is the category for ‘force majeure’ events – whether specifically listed in – or generally addressed in – all of which result only in the provision of only additional time to the Contractor. Furthermore, the clause states that the contractor is not entitled to payments for such delays unless they result from the actions of the Owner, the Consultant and any related employs of these parties.

Architects serving Clients who are Owners of active construction projects should understand this and should advise their Clients accordingly as soon as possible. In such unsettled times, Clients will be uncertain and possibly even sympathetic to circumstances beyond their control – but this does not necessarily mean that they are financially responsible for related disruptions on their job site. Colloquially, it should be understood that Owners are not required to act as insurers, and CCDC-2 does not oblige them to indemnify their Contractor against cost implications and losses due to force majeure events like COVID-19.

In all circumstances, Clients should be aware of the specific reason for a delay to their project. If construction came to a halt by health-related stop work Order issued in response to COVID-19, then 6.5.2 would apply, and the date of such an Order should be noted related to potential future claims for additional time and cost.

However, for the majority of construction projects [recently defined by Provincial legislation as ‘Essential Services’], construction has been allowed to continue. Stop work orders have therefore not been issued to construction sites. As such, the only category which applies to COVID-19 delays is, an all-inclusive clause which affords the Contractor the right to submit a claim for additional time only.

Under any circumstance, Clients should also be aware that claims from a Contractor must be provided in writing [via ‘Written Notification’] no later than 10 days from the start of the event which caused the delay. If March 18, 2020 was the posted date that COVID-19 was declared a pandemic in the province of Ontario, Notices in Writing for delays issued after March 28th may be questionable, unless they offer other substantial reasons for subsequent delay [if related to COVID-19].

However, in the unprecedented conditions of COVID-19, it seems likely that Contractors will not be content with just the additional Contract time which CCDC-2 affords. Owners can expect to receive claims for additional expenses as well – claims which may even be supported by documentation from the Contractor’s lawyer. Indeed, lawyers representing the largest players in the Ontario General Contractors Association are said to be presently working on such documentation – seeking to posit legal substantiation that this pandemic isn’t adequately addressed within the contents of CCDC-2.

Owners should expect that such claims for force majeure events will be construed narrowly, citing COVID-19 as unprecedented and outside the descriptions within CCDC-2. Ambiguity in CCDC-2 will be used to the advantage of the claiming party – presuming that such ambiguity actually exists in CCDC-2.

Owners would be best advised to seek legal counsel in response to such claims – but they should also remember that they are not automatically obliged by CCDC-2 to offer the Contractor anything more that additional time commensurate to the extent of the delay.

If further resolution is required, prudent Owners should understand the legal considerations surrounding ‘force majeure’, which is subject to the following basic principles: • force majeure must generally prevent construction, and not just render it less efficient or uneconomic • force majeure must be beyond the control of the claimant and beyond the scope of foreseeable business risks • the claiming party must make all reasonable efforts to mitigate the force majeure event and its impact on the Contract Parties • reasonable efforts to mitigate force majeure may include the incurring of some financial losses [which are presumably finite and circumstance dependent] • the obligation to demonstrate force majeure and compliance with the legal requirements mitigate its impact lie with the claiming party

With this greater understanding of force majeure, Owners can better defend their legal position. Because of these principles, force majeure construction claims typically result in the provision of relief from performance related to an extension of time - and time only.

However, in the context of COVID-19, we all understand that ‘normal operations’ at a construction site cannot occur given supply chain disruptions. Contractors will struggle with this, and Owners may advise their Contractors to push on however they can. Owners may even accept that that construction efficiencies will be reduced and will agree to extend the Contact timeline accordingly.

Within this context, Owners should realize that the directions which they give their Contractor may still expose them to claims for added time and financial compensation as applicable [through either or 6.5.1]. Faced with an inefficient work site and looming deadlines, a pressured Owner may innocently direct a Contractor to continue construction as best he can, not realizing that this order could tacitly tie them to financial implications which have yet to materialize.

As such, Owners should take the time to confer with their Contractor to determine the implications of continuing construction in the best way possible, understanding the applicability of any associated costs upfront. Another option may even be to consider halting construction entirely, understanding that the no one can presently predict when it might become viable to reactivate it again.

Finally, for recent or soon-to-be-endorsed CCDC-2 Contracts, note that COVID-19 presently exists and is therefore a ‘foreseeable business risk’. As such, the pre-existence of COVID-19 would likely nullify the applicability any related future force majeure claims. Stated in another manner, Contractors participating in Tenders in the current context should be allowing for all foreseeable expenses related to COVID-19 within their bids – and COVID-19 cannot be used at a future date for a force majeure claim.

This last point may induce gun-shy Owners to consider issuing Tenders even now, serving perhaps as one small economic stimulus in these otherwise difficult and uncertain financial times.

Ultimately, in the face of any COVID-19 force majeure claim, Owners might be best-advised to seek legal counsel - but only after they have a sound understanding of their obligations under CCDC-2 and of the basic legal principles surrounding force majeure – principles which may afford more protection than they might have otherwise realized.

NOTE:  The author and the Niagara Society of Architects offer the above for discussion only, and do not purport to offer legal advice.  For specific matters concerning the COVID-19 and how it relates to contractual obligations and construction, advice should be sought from a lawyer.

  For information on Whilteline Architects Inc. click here.