The recent hurricanes in the Gulf Coast region, flooding in the Midwest, and other natural disasters have resulted in an increase of force majeure claims for the construction industry and have raised interesting and complex issues relative to force majeure clauses.
In general terms, force majeure claims essentially free both parties to a construction contract from liability or obligation for failure to perform in the event of extraordinary circumstances, such as “acts of God” or occurrences outside the control of the parties. Depending on the contract language, force majeure events can include unusually severe weather, labor strikes, natural disasters, or governmental actions/changes in law. Under most construction contracts, force majeure events are generally not considered to be compensable, meaning neither party is entitled to compensation as a result of the impact of the force majeure event. However, force majeure events are typically excusable delays and the contract completion date is extended for a period equal to the force majeure impact period.
Force majeure claims become complicated when there is a major event that not only directly impacts the work but also creates potentially changed working conditions after work resumes. In these cases, several questions regarding the contractual language with respect to allowable project extensions, responsibility for mitigating the event’s impacts, as well as the costs associated with mitigation efforts create complications when preparing or analyzing force majeure claims. The primary challenges associated with complex force majeure claims relate to continued impacts and mitigation responsibilities. Certain continued impacts may result from severe natural disasters, including reduced labor force and reduced labor productivity. Additionally, the complex issue of defining a party’s responsibility to mitigate the event’s immediate and continuing impacts often becomes a point of contention. The parties are often forced to consider the costs to mitigate versus the potential commercial impracticability or impossibility.
Belmont has extensive experience assisting owners, contractors, and sureties relative to force majeure claims. Our construction claims consultants assist in the quantification of damages, schedule delays, accelerations, and/or productivity impacts, as well as provide advisory services to facilitate the timely resolution of force majeure claims.