DFI Magazine May/June 2020 - 111

L E G A L LY

SPEAKING

COVID-19 Contractual and Legal Considerations
On March 6, Smith Currie first reported on
emerging impacts related to the disease
COVID-19 nationally. At that time, the U.S.
had approximately 500 reported cases and
was just beginning to hear rumblings of
construction supply chain disruptions. The
legal firm posted on its website that:
While the outbreak in the U.S. has not
reached the magnitude seen in China
(greater than 80,000 cases), South
Korea (6,000 cases) or Italy (3,000
cases), the U.S. has begun to feel the
impacts of coronavirus on trade and
resultant disruptions to supply
chains, as many raw materials used in
U.S. manufacturing and manufactured goods consumed in the U.S.
originate from China and the other
impacted countries. Furthermore, the
U.S. is likely to suffer more direct
impacts from coronavirus, as the
Centers for Disease Control and
Prevention (CDC) notes that "[it's]
likely that at some point, [a] widespread transmission of [coronavirus]
in the United States will occur."
By early April, the number of reported cases
in the U.S. had skyrocketed (245,601 as of
the submission of this article) and 31 states
and the District of Columbia are under
statewide business closures and/or stay-athome orders. While engineering and
construction have largely been exempted
from these business restrictions, the
construction industry has nevertheless
been substantially impacted. Furthermore,
the forecast is for even greater spread of
COVID-19 (caused by a virus called SARSCoV-2) and for increased economic
disruption in the U.S. and its trading
partners. That will make it increasingly
likely that COVID-19 will cause more
substantial impacts to construction
material supply chains, labor availability
and construction projects in general.
To prepare for, address and mitigate
ongoing and near certain future impacts,
contractors, subcontractors, material
suppliers, owners, sureties and other

construction project participants should
analyze and consider contractual,
insurance, statutory, regulatory and other
legal protections and relief that may be
available. Among these protections and
relief that will be covered here are:
* Paycheck Protection Program 7(a)
Loans under the CARES Act
* Contractual force majeure clauses and
o t h e r p ro v i s i o n s p ro v i d i n g f o r
excusable delays

Brian S. Wood, Daniel F. McLennon,
Partners, Smith Currie

* Material escalation provisions
* Suspension and termination for
convenience clauses
* Common law relief for impracticability
or impossibility of performance
* Commercial general liability and other
insurance coverage options
* Contractual indemnification provisions

CARES Act - Title I -
Keeping American Workers Paid
and Employed Act
Signed into law on March 27, 2020, the
Coronavirus Aid, Relief, and Economic
Security (CARES) Act contains a small
business loan program, the Paycheck
Protection Program (PPP), designed to
provide quick financing of payroll and
overhead (rent, interest on mortgage
payments and utilities) for businesses with
less than 500 employees and existing SBA
small businesses through June 30, 2020.
These loans are eligible for forgiveness
upon submission of documentation
demonstrating that the loans were used for
payroll costs, interest on a covered
mortgage, rent and utilities.

Force Majeure and Excusable Delays
Modern construction contracts commonly
contain provisions addressing risks of delays
resulting from force majeure (translated from
French as superior force). A force majeure
clause excuses a party's performance
obligations when certain events or circum-

While engineering and
construction have largely
been exempted from
[statewide business closures
and/or stay-at-home orders],
the construction industry has
nevertheless been
substantially impacted.
stances beyond that party's control delay
performance or make performance commercially impracticable, illegal, inadvisable
or impossible. These clauses provide for
time extensions for covered events, but
typically do not provide for compensation
for the delays and impacts caused by the
events. Examples of force majeure events are
war, riots, earthquakes, hurricanes,
lightning, explosions, energy blackouts,
unexpected legislation, lockouts, slowdowns and strikes. When invoking a force
majeure clause, a contractor or subcontractor should consider the following:
* Does it cover epidemics/pandemics?
While courts have generally held that
epidemics are force majeure events,
applicability may depend on foreseeability of the epidemic.
DEEP FOUNDATIONS * MAY/JUNE 2020 * 111
DFI Magazine May/June 2020

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