A force majeure clause in a construction contract temporarily excuses a party from performing its obligations under the contract where an unexpected event prevents performance. Force majeure is distinct from the legal doctrine of frustration which has a higher threshold and releases the parties from all future obligations under the contract.
In order for a force majeure clause to apply to the current COVID-19 pandemic, the invoking party must show that:
- COVID-19 is a force majeure event within the meaning of the particular contract entered into by the parties; and
- COVID-19 was directly responsible for any delay in the performance of the contract, including the possibility of temporarily preventing any performance from continuing until the impacting event subsides.
The Government of Ontario released a List of Essential Workplaces (the “List”). Section 28 of the List includes construction work and services, including demolition services, in the industrial, commercial, institutional and residential sectors. The complete List is available here. Accordingly, a party must carefully review the contractual terms to determine whether to invoke a force majeure clause.
Parties should also review their contract to determine if another delay clause may be used to extend the period to perform the contract with or without additional compensation and ensure that proper timely notice of any delay due to COVID-19 is provided. For example, section GC 6.5.3 of a standard CCDC-2 2008 contract may permit a contractor to extend the time to complete the contract due to delay caused by COVID-19 on the basis that it is a “cause beyond the Contractor’s control”.