Construction Contract Suspension and the Coronavirus (COVID-19)

John GregoryCovid-19 Coronavirus, Work Stoppages and Terminations

Construction Contract Suspension and the Coronavirus (COVID-19)

With the Coronavirus at our front door we all share concerns about the health of our families.  Behind that is the health of our business and if you’re in construction, you can expect the impact of the virus to hit sooner than later. Like many other cities, Boston is under a construction “boom”. However, on Tuesday, Boston mayor Marty Walsh, ordered the suspension of all construction work in the city. The suspension is expected to last at least 14 days (and possibly longer). We can expect other municipalities to follow suit. Suspension was probably chosen over termination, with the expectation that the virus will ultimately be under control and the projects will resume.  This also avoids the more draconian consequences of termination.

So what is the effect of suspending work on a construction project. In order to know your rights and obligations you need to carefully read your contract. Don’t just read the terms on  suspension, read the entire contract as the terms are interconnected, such as force majeure, damages and changes to name a few. And because many contract terms are written differently, you can’t rely on what the other guy said.  You need to read your contract.

Make sure you are in constant communication with the party with whom you contracted to keep updated on the suspension, the process and any progress.  You need to protect your work, tools, fixtures and equipment and where necessary remove tools and equipment from the project. Theft is always a concern you need to address. You also need to submit a current pay application.  Make sure your subcontractors and suppliers are on notice to get these to you ASAP.

Some contracts provide that if a project is suspended for a certain period of time one or both parties may terminate the contract. Termination is what it sounds like; it effectively “ends” the contract.  Before you take any action to terminate or other action, you should consult an experienced construction lawyer.

Whether termination is by you or against you, the contract typically provides for  certain rights and takes others away. Termination may give you rights to recover certain damages or it may limit the damages you can recover.  Once the contract is terminated, many of the terms of the contract you could previously enforce for your benefit will be lost.

The terminating party may be required to give the other party prior written notice of a specified number of days before the termination becomes effective. Also,  the contract may dictate the form of delivering the notice, such as mail, email, certified mail or other means.

If you are dealing with a project in this time of uncertainty due to the coronavirus, make sure you know your rights, the good and the bad. Be proactive and plan ahead.