The Project Is Closed – What Do I Do Now?

Leonard KlingenCovid-19 Coronavirus, Work Stoppages and Terminations

The Project Is Closed – What Do I Do Now

If there is no suspension or force majeure or delay clause in your contract, there is an implied duty requiring the owner to make the job site available so that a contractor can perform its work.  This is actually a subset of the implied duty of the contractor and the owner to do nothing that would hinder performance of the contract.  So when an owner locks up the job site and prevents completion of the work, the owner is breaching its duty to have the jobsite available.

There is a related doctrine that holds that one is excused from contractual obligations if a contract is impossible to perform.  In order to raise this as the basis for a claim, a unexpected and unforeseeable event not within the control of either party must have occurred and rendered contract performance impossible or commercially impracticable.

Under either doctrine, the contractor has some remedies available, including rescission, claim for extended general conditions and claims for other costs incurred due to the owner’s breach.

First, the contractor must immediately notify the owner in writing that the owner’s actions have rendered performance impossible and that the contractor will be seeking all available remedies.  Given that the owner may have had no choice but to close the work, communications from the contractor should remain professional and courteous, but also firm. Most projects could probably absorb a two week shutdown without too much difficulty, but as the weeks and months start to drag on, accurate and timely record keeping by the contractor and its subcontractors will become increasingly important. At this point reaching out to your construction lawyer would also be advisable.

The contractor should also document each and every cost item related to the job closure and include the reason for the cost item, the daily cost of the item and all related or ancillary costs, as well as the reason the cost continues to accrue despite the shutdown.  Periodic updates to the owner may be in order and would help keep the lines of communication open.

Be sure to check the contract for claim deadlines as they are often based on the start date of the delaying event.  If the contract requires that a contractor submit its claim within 14 days of first becoming aware of the event, it is vital that the claim be submitted, reserving the right to amend, before the 14 days are up even if the claim is not yet complete.  Monthly updates with support should be communicated to the owner.

The contractor should also communicate with its subcontractors and require that they do the same, and bundle the claims together and forward to the owner.

It may well be that litigation will be necessary to collect on such claims, but keep in mind that without accurate and organized records, a contractor won’t be able to collect anything.

So what happens if the project is closed but I have a shipment of cabinets arriving from overseas?

Just because the jobsite is closed doesn’t mean that the supply lines to the job are shut down.  In a case like this, verify with the contractor and the owner whether access to the site is permitted to allow staging of the millwork.  If so, verify that there is insurance coverage for the stored materials and there is sufficient jobsite security to protect the product. If no on-site storage is available, seek an off-site bonded warehouse, make sure there is insurance for the materials stored and advise the contractor of this course of action and the cost thereof.  Make this cost part of the claim.

If the project is closed and I have a rented crane on site

The job site may be shut down, but rental charges continue to accrue.  Depending on the length of the shutdown, and if it is possible to access the work site, it may make sense to remove the crane.  If so, the cost of demobilization and the later cost of remobilization should form part of the delay claim. If recovery is not possible, the full cost of the crane rental should be made part of the delay claim.

On the other hand, if the rental company refuses to come out and dismantle the crane and remove it from the site, then there should be no cost for the crane rental for the duration of the time the rental company refuses to dismantle.  Again, documentation is crucial.

If I don’t have a written contract

The implied terms discussed above exist whether or not there is a written contract between the parties.  Documentation is even more crucial here than in the case of a written contract. In addition to documenting all post-shutdown events and costs, it is also important to gather up all pre-shutdown communications so as to help establish the existence and the parameters of the contract.