Force Majeure, COVID-19, Stay at Home Orders … Let’s take a deep breath and “talk it over”

My grandfather used to sit me on his lap and say, “let’s talk it over,” then I had no clue what he wanted to “talk over,” but today we are bombarded with issues.

Force Majeure

There is tremendous discussion right now on so-called “force majeure” clauses and the impact on construction and design. The force majeure issue is a subset of a broader contract defense known as “Impossibility of Performance.” Basically, if a contract becomes “impossible” to perform as a result of some influence that is beyond the promisor’s (the person making the promise) control then the performance of the contract can be relieved or modified. Such influences can be any outside force that makes the contract performance impossible. U.S. courts have held that certain combinations of specification requirements can create a situation that is impossible to perform. For instance, in Appeal of Hobbs Constr. & Dev, Inc., ASBCA No. 34890, 91-2 B.C.A. (CCH) p23755 (Jan. 30, 1991) a U.S. Board of Contract Appeals (“BCA”) held that a combination of specification requirements made it impossible to achieve a 1/8 inch in ten feet flatness requirement also required in the specification.

Other such actions are “acts of God” or in Latin: “vis major” or in French: “force majeure,” meaning superior force. I’m not sure how the French language won over on this one when the law book references are otherwise packed with Latin phrases, but force majeure has become the common phrase. The real issue is what qualifies as an act of God? Or some might argue, how do we know? Fortunately, it is not a literal interpretation but instead has become a grouping of events that we have no control over, such as a tornado or hurricane. The relevant question today is: does the COVID-19 pandemic qualify as an act of God? The advantage of having a contract clause defining what qualifies as force majeure is that it defines what it is. However, just because the contract is silent does not mean that the legal defenses of “Impossibility” or its subset issue of “force majeure” does not apply.

The AIA Contracts

The standard AIA Owner-Architect agreement does not have a force majeure clause. I do not know why. The A201-2017 General Conditions does contain the following:

• § 8.3 Delays and Extensions of Time
• § 8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by (1) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor; (2) by changes ordered in the Work; (3) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, or other causes beyond the Contractor’s control; (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) by other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.

There are other related clauses in A201-2017 paragraphs 10.2.1, 10.2.2, 10.2.3, 10.4 and 11.4.

Someone will likely point out that the AIA B101 does include paragraphs 3.1.3 and 4.2.1 that allude to the issue. However, in a perfect world I would like to see the following in the Owner-Design Professional contract:

• § XXXX If the Architect is delayed at any time in the commencement or progress of its work by (1) an act or neglect of the Owner or, an employee of the Owner, or an act of failure to act of the Contractor or a Separate Contractor; or (2) by changes ordered in the Work; or (3) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, epidemics, pandemics or other causes beyond the Architect’s control; or (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) by other causes that are beyond the Architect’s control and that justify delay, then the time for the Architect’s performance shall be extended for such reasonable time as the conditions causing the delay exist and for reasonable time to recover and staff the project.

There is an interesting case from 1857 in which a lumber contractor was excused from performance due to a cholera epidemic, Lakeman v Pollard, 43 Me. 463 (1857). There are not many recent cases because medical science has evolved to the point that it is difficult to find diseases for which there is literally no cure. But in 1857 cholera could be a death sentence. The jury found that the laborer was justified in leaving the work site because of the cholera epidemic. Upon a post-trial challenge to the jury instructions, the court held as follows:

The plaintiff was under no obligation to imperil his life by remaining at work in the vicinity of a prevailing epidemic so dangerous in its character that a man of ordinary care and prudence, in the exercise of those qualities, would have been justified in leaving by reason of it, nor does it make any difference that the men who remained there at work after the plaintiff left were healthy, and continued to be so. He could not then have had any certain knowledge of the extent of his danger. He might have been in imminent peril, or he might have been influenced by unreasonable apprehensions. He must, necessarily, have acted at his peril, under the guidance of his judgment.

The propriety of his conduct in leaving his work at that time must be determined by examining the state of facts as then existing. When the laborer has adequate cause to justify an omission to fulfill his contract, such omission cannot be regarded as his fault. Whether or not the plaintiff had such cause was a question of fact, to be determined by the jury, upon the evidence.

Compliance with a government order (discussed below) would likely qualify as an event excusing performance. Absent a government order and absent a Force majeure clause in a contract the issue is not so clear.

State Shelter at Home Orders

We are also seeing so-called “shelter at home” orders by state governors. In Minnesota we are not yet there. Our Governor has signed Executive Order 20-04 closing restaurants, bars, clubs etc., but other states have gone a step further. Many of us are anticipating that next step. The most important thing we can all do is to take a deep breath and take it a day at a time. Also, we need to recognize that a “shelter at home” order is not an all-encompassing sentence to lock ourselves in our homes. We do, however, want to comply and do our best to “flatten the curve” of the corona virus spread. Two adjacent states are worth focusing on to give us some perspective.

Michigan Executive Order 2020-21

This order is effective in Michigan from March 24. 2020 to April 13, 2020 at 11:59 PM. It orders Michigan residents to stay at home but includes the following exclusions:

4. No person or entity shall operate a business or conduct operations that require workers to leave their homes or places of residence except to the extent that those workers are necessary to sustain or protect life or to conduct minimum basic operations.

1. For purposes of this order, workers who are necessary to sustain or protect life are defined as “critical infrastructure workers,” as described in sections 8 and 9.
2. For purposes of this order, workers who are necessary to conduct minimum basic operations are those whose in-person presence is strictly necessary to allow the business or operation to maintain the value of inventory and equipment, care for animals, ensure security, process transactions (including payroll and employee benefits), or facilitate the ability of other workers to work remotely.

Businesses and operations must determine which of their workers are necessary to conduct minimum basic operations and inform such workers of that designation. Businesses and operations must make such designations in writing, whether by electronic message, public website, or other appropriate means. Such designations, however, may be made orally until March 31, 2020 at 11:59 pm.

Thus, in Michigan businesses can designate individuals who are “necessary to conduct basic operations,” which necessarily would include, payroll, employee benefits, billing and collections and allow the majority of employees to work remotely. Other provisions define social distancing criteria.

Wisconsin Emergency Order #8 (Superseded by Emergency Order #12)

Wisconsin’s Emergency Order #8 has effective dates ranging from March 17 to March 20 depending upon the activity. There is no end date meaning the Order remains in effect until revoked by the Governor. However, as of 8 AM on Wednesday March 25 this order was superseded by Emergency Order #12 that remains in effect until Friday April 24, 2020. This new Order requires all individuals to stay at home, but includes key exemptions:

2. Non-essential business and operations must cease. All for-profit and non-profit businesses with a facility in Wisconsin, except Essential Businesses and Operations as defined below, are required to cease all activities at facilities located within Wisconsin, except:

1. Minimum Basic Operations, as defined below, and
2. Any operations consisting exclusively of employees or contractors performing activities at their own home or residences (i.e., working from home).

“Minimum Basic Operations” are defined as:

14. Minimum Basic Operations. For the purposes of this Order, Minimum Basic Operations include the following, provided that employees comply with Social Distancing Requirements, to the extent possible, while carrying out such operations:

1. The minimum necessary activities to maintain the value of the business's inventory, preserve the condition of the business's physical plant and equipment, ensure security, process payroll and employee benefits, or for related functions, including where these functions are outsourced to other entities.
2. The minimum necessary activities to facilitate employees of the business being able to continue to work remotely from their residences.

There are 26 categories of businesses that are exempt from the stay at home order, two are relevant and noted below:

n. Critical trades. Building and Construction Tradesmen and Tradeswomen, and other trades including but not limited to plumbers, electricians, carpenters, laborers, sheet metal, iron workers, masonry, pipe trades, fabricators, finishers, exterminators, pesticide application, cleaning and janitorial staff for commercial and governmental properties, security staff, operating engineers, HVAC, painting, moving and relocation services, forestry and arborists, and other service providers.

u. Professional services. Professional services, such as legal or accounting services, insurance services, real estate services (including appraisal, home inspection, and title services). These services shall, to the greatest extent possible, use technology to avoid meeting in person, including virtual meetings, teleconference, and remote work (i.e., work from home). provide services that are necessary to maintaining the safety, sanitation, and essential operation of residences, Essential Activities, Essential Governmental Functions, and Essential Businesses and Operations.

Also excluded under “Essential Infrastructure “ … are public works construction, school construction, Essential Business and Operations construction, construction necessary for Essential Governmental Functions, and housing construction, except that optional or aesthetic construction should be avoided)…”

The Order is 16 pages long and very detailed including a detailed section on “Social Distancing Requirements”. And finally, in true governmental form the order includes the following: “Individuals experiencing homelessness are exempt from this Section, but are strongly urged to obtain shelter.” And “Individuals whose homes or residences are unsafe or become unsafe, such as victims of domestic violence, are permitted and urged to leave their home and stay at a safe alternative location.”

The key take-away from these state orders is that we all need to wait and see what happens next in Minnesota. If … or when, our Governor acts we all need to carefully read the order and determine how best to comply while still serving our clients and keeping our businesses solvent and thereby protecting our employees.

Jeffrey W Coleman, PE, FACI