The novel coronavirus and the resulting disease of COVID-19 have made indelible impacts on the construction industry. Because there is a relatively small profit margin for many construction contracts, a disproportionate number of contractors have been unable to withstand the financial blow dealt by the COVID-19 pandemic. Many have had to adjust their current construction contracts and draft new contracts that make reference specifically to COVID-19, as well as any future pandemics; they have had to add language identifying health-related epidemics caused specifically by viruses or bacteria as possible contractual impacts. Further, many contractors have added clauses to address increased costs related to labor and materials due to supply chain interruptions. Rewriting construction contracts with the assistance of a professional construction law attorney has become a necessary task for contractors as the current pandemic endures, so they can secure some level of contractual relief for construction projects impacted by COVID-19.
As COVID-19 established itself as a long-term influence on the construction industry contractors were forced to stop mid-contract or not start work at all; there have been, at a minimum, significant delays caused by the pandemic. These things have occurred due to a variety of factors, from supply chain disruptions to stay-in-place directives and lockdown orders to other major labor force disruptions. The ability of contractors to meet their contractual obligation became increasingly difficult, almost overnight, and continues to be a problem for many throughout the construction industry. It has contractors considering how to apply the protection clauses in their contracts that deal with impacts such as unanticipated delays and a need for time extensions, especially if those contracts do not contain explicit force majeure provisions. In Texas, contractors may be protected by the common law doctrine of impossibility.
The impossibility doctrine functions as a defense for non-performance of contractual obligations in Texas. Referred to as impossibility of performance in Texas courts, this defense can be applied even if the performance of contractual obligations is not absolutely impossible; it is utilized to cover circumstances where performance is impracticable due to an unforeseen event not caused by the contractor. The impossibility doctrine may be available in the case of death or incapacity of a person necessary for performance, destruction or deterioration of a thing necessary for performance, and prevention by governmental regulation or order. It could apply relative to the COVID-19 pandemic according to the first or third case, most directly.
Many construction contractors cannot live up to their contractual obligations due to negative circumstances related to COVID-19. In the absence of force majeure provisions in their contracts, they might engage the impossibility doctrine, making the argument that they were unable to perform due to safety issues, like endangerment of employees and the public should there be a need for things like travel, business meetings, etc. Texas courts are left to evaluate whether they should allow contractors to utilize this doctrine as a defense—they must decide if contractors are truly taking prudent actions in the interest of public health and welfare. The impossibility defense rarely has been granted by the courts in the past; the lack of solid legal precedent complicates things for the courts, but the extreme costs due to the global pandemic have painted a picture for them that at least provides hope for relief to contractors.
The COVID-19 pandemic has wreaked havoc for those in the construction sector. The impacts of the pandemic make it important now, more than ever, to consider engaging an experienced construction law attorney to draft and review your contracts. Reeves Law can advise you about limiting your risk during the COVID-19 pandemic and help you prepare for the future. If you require legal guidance for your construction business, contact Reeves Law online or by phone at (512) 827-2246 for a free consultation.