Hurricane Harvey and Force Majeure Claims
Hurricane Harvey’s unprecedented flooding has resulted in increased force majeure (FM) claims for the construction industry.
In general, FM claims free both parties to a construction contract from liability or obligation for failure to perform in the event of extraordinary circumstances, such as “acts of God” or occurrences outside the parties’ control. Depending on the contract language, FM events can include unusually severe weather, labor strikes, natural disasters or governmental actions/changes in law.
Contracts often differ regarding the definition and treatment of an FM event, including whether FM events are compensable or excusable delays. It therefore is critical for all parties to comply with FM provisions. Successful FM claims must establish a causal connection between the FM event and inability to perform under the contract. The impacts of an FM event could include:
- Reduced labor availability and productivity
- Impacts to utilities necessary to perform the work
- Lack of basic utilities/housing for labor
- Site availability
- Impacts to material and equipment suppliers
FM claims become complicated when there is a major event that not only impacts the work but also creates changed working conditions after work resumes. It is critical to document key project performance data, including labor productivity, absenteeism, labor turnover, and other factors that could impact project cost and schedule.Successful FM claims rely on this documentation to substantiate the impact and duration of the FM event on project performance.