Construction lawyers see COVID changing delay and force majeure clauses

Changing material prices and lien timelines reflected in legal agreements

Construction lawyers see COVID changing delay and force majeure clauses
Andrea Lee

While many industries have been on a sustained work-from-home regimen or a hiatus from serving the public, the construction industry has marched onwards and is increasingly going “back to normal.” As of May 19, worksites are fully operational and Federal Infrastructure Minister Catherine McKenna has plans to stimulate the economy with shovel-ready projects.

That doesn’t mean, however, that the legal issues in the sector have been routine, say lawyers.

“Construction was one of the industries that, for the most part, stayed open. There were certain sectors of the industry that were shut down . . . construction lawyers that serve the industry continued to be quite busy through March and April,” says Andrea Lee, partner at Glaholt Bowles LLP. 

“Projects are coming back to life in a slow and cautious way. The questions I'm starting to get now are [about] the provinces that are at different stages of reopening. So is it safe for me to send my employees to out of province projects? And what risks are there in doing that? And how can we figure out whether or not we can do those responsibilities under the contract remotely?”

Toronto lawyer Andrew Jeanrie, a partner at Bennett Jones LLP, says his workload is busy as ever, but has shifted away from diving deeply into one or two new projects at a time. Instead, it is more a broad-based, question-and-answer flow about existing clients’ ongoing projects. Things may even pick up, he says, once new projects layer on top of existing inquiries.

“One trend, in particular in construction, that you're seeing right now has been what I call crisis management,” he says. “Determining how to run sites as safely as possible, given the pandemic, through to . . . . additional health and safety training, trying to create different health and safety program —which is quite different — more cleaning, onboarding new employees to managing more people on sick days.” 

A particular hang-up faced by many construction clients has been uncertainty around lien time periods, after an emergency regulation suspended limitation periods and procedural deadlines — making it hard to know when to release holdbacks, say both Lee and Jeanrie. 

“It was a bit tricky for the construction bar to navigate that temporary suspension,” says Lee, who helped make submissions to the MAG, which in turn revived the construction deadlines.

When it comes to timelines governed by contracts, most standard contracts in the construction space already employed force majeure clauses, says Jeanrie. Now, he says, clients are trying to navigate how to address the new challenges posed by contractual obligations. For example, he says, if a series of pandemic-related events raises the price of steel, how does the language in a fixed price contract deal with that? What turns “on” and “off” the force majeure clause in a situation of prolonged emergencies?

“One big thing that's really happening now — for almost every existing job — is that even if you weren't stopped, you have found your productivity on site has gone down, and therefore, delay claims are being triggered,” he says. “For new contracts, we're already seeing a new world of COVID clauses. Owners and contractors and everyone at different levels are all starting to amend their contracts. We're starting to negotiate contracts that are trying to specifically contemplate COVID pandemic world, whereas before it fell under your generic force majeure clause.” 

Among the delays facing construction clients are emergency measures to enforce social distancing, proper washrooms and cleanliness, awaiting feedback from swamped municipal officials, says Jeanrie. On the other hand, says Lee, quieter streets have helped construction projects move along, and many architects, inspectors and adjudicators have been open to working remotely.

While it has been difficult to navigate the various back-to-normal timelines in different provinces, Lee says online mediation has also allowed access to mediators from other provinces.

“If you're going to insist that a contractor stick to the original schedule and price and not share any of the results coming out of COVID, then I think you could see contractors refusing to go forward or a large dispute at the end of the day,” says Lee. “What we're seeing now is certainly more of a cooperative spirit amongst the industry players.”

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