Recent hurricanes, flooding, wildfires, and other natural disasters have resulted in an increase of force majeure claims for the construction industry and have raised interesting and complex issues relative to force majeure clauses. An increasing number of force majeure disputes are leading to dispute resolution forums such as mediation, arbitration, and/or litigation because of their increasing complexity and magnitude.
In general terms, force majeure clauses essentially free both parties to a construction contract from liability for failure to perform in the event of extraordinary circumstances, such as “acts of God” or occurrences outside the control of the parties. Depending on the contract language, force majeure events can include unusually severe weather, labor strikes, natural disasters, or governmental actions/changes in law. Under most construction contracts, force majeure events are generally not considered to be compensable, meaning neither party is entitled to compensation as a result of the impact of the force majeure event. However, force majeure events are typically excusable delays and the contract completion date is extended for a period equal to the force majeure impact period.
Disputes related to force majeure impacts become complicated when there is a major event that not only directly impacts the work but also creates potentially changed working conditions after the work resumes. In these cases, questions regarding the contractual language with respect to allowable project extensions, responsibility for mitigating the event’s impacts, and the costs associated with mitigation efforts create complications when preparing or analyzing force majeure claims. The primary challenges associated with complex force majeure claims relate to continued impacts and mitigation responsibilities. Various continued impacts may result from severe natural disasters, including reduced labor force and reduced labor productivity. Additionally, the complex issue of defining a party’s responsibility to mitigate the event’s immediate and continuing impacts often becomes a point of contention. The parties are often forced to consider the costs to mitigate versus the potential commercial impracticability or impossibility.
Courts, arbitration panels, and mediators have relied upon construction experts such as Interface Consulting to analyze and quantify force majeure impacts. Our construction experts have extensive experience assisting owners, contractors, and sureties relative to force majeure claims. Our examination of force majeure claims includes analyzing standard of care issues and quantifying damages, schedule delays, accelerations, and/or productivity impacts. Additionally, our consultants also serve as construction experts and have testified in US federal and state courts and numerous arbitrations administered under AAA, LCIA, UNCITRAL, and ICC forums concerning force majeure issues.