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COVID-19 can spawn contractual issues for construction

Russell Hixson
COVID-19 can spawn contractual issues for construction

As the COVID-19 crisis continues to unfold, legal experts and construction stakeholders can foresee contractual problems on the horizon.

The BC Construction Association (BCCA) is calling on government to specify the global pandemic as a way out of contractual obligations should sites become impossible to work on.

“These are unprecedented circumstances and the federal government has responded with unprecedented support with $82-billion COVID-19 Economic Response Plan and changes to some EI, mortgage and tax regulations,” said BC Construction Association president Chris Atchison. “We also need government to look at force majeure contract terms to implement a standardized definition of force majeure that includes ‘quarantine restrictions,’ and/ or ‘epidemics’ so contaminated sites can shut down, free of penalty.”

According to Jack Yong, an attorney with Lawson and Lundell LLP in Vancouver, force majeure clauses allow a party to either get out or delay the performance of something without breaching a contract due to an “act of god” like disasters, government actions, wars, strikes or terrorist attacks.

“It’s basically an escape clause,” he said, noting that they don’t tend to vary greatly from province to province.

The concern, explained Yong, is that there are all sorts of arguments that could be made against how a pandemic is impacting work on a construction site.

“The world has not seen a lot of global pandemics,” he said. “But it goes beyond whether the pandemic has occurred and into how it impacts ability to perform the contract.”

Currently there is no government order barring construction work in B.C. which would fall under “government action” in a force majeure clause.

However, explained Yong, if the government were to pass a law defining a pandemic as a force majeure, it would take precedence over the contract itself, regardless of the contract’s specific wording.

Yong also noted that the industry should be reminded of the legal concept of a frustrated contract if no progress can be made on force majeure.

“Frustration is a situation that makes it difficult or impossible to perform the fundamental terms of the contract which makes the contract ‘frustrated’,” Yong said. “It has a higher standard but is also a possibility. Frustration is so fundamental it ends the contract because the parties just can’t perform the core obligations of the contract any longer.”

Yong also noted the pandemic could create other legal issues in construction including disputes between construction companies and suppliers who can’t perform. Temporary foreign workers will face issues getting into the country for construction jobs and labour law could come into play if layoffs start to increase.

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