Construction Law Considerations in Light of COVID-19 (Posted April 2, 2020)

On March 31, 2020, the Manitoba Government announced that it would be issuing a new public health order to reduce the spread of COVID-19, effective April 1, 2020. Accordingly, all “non-critical” businesses are required to close until April 14, 2020, at the very least.

Like in Ontario, there are a number of exceptions to the new public health order, and those exceptions include the construction industry. Specifically, the order excludes the following construction-related businesses from closure:

CONSTRUCTION

27. A business engaged in construction work or services in the industrial, commercial, institutional and residential sectors, including demolition services and expanding, renovating, converting or repurposing existing spaces.

28.A business engaged in construction work or services that are required to ensure safe and reliable operations of provincial and municipal infrastructure.

29.A business engaged in construction work or services that supports environmental rehabilitation projects. Notwithstanding the fact that construction-related work is able to continue, a number of issues will arise as a result of COVID-19, which are addressed below.

BUILDERS’ LIENS

As the economy slows down due to COVID-19, contractors and sub-contractors may find that they are not getting paid as expected. Filing a builders’ lien is the traditional course of action when faced with non-payment.

In Ontario, the government has issued an order which has the effect of suspending limitation periods and laws which establish a period of time in which a step must be taken in any Ontario proceeding. While there is some question as to whether or not this applies to builders’ liens, in Manitoba, no such order has been issued. This means that limitation periods and timelines for registering liens have not been suspended.

We encourage you to contact us as soon as possible if you are facing non-payment so that we can ensure there is sufficient time to prepare and register your lien claim.

DELAY CLAIMS

While it is too soon to predict the full impact COVID-19 will have on construction projects, it is safe to say that there will be impacts, likely due to labour shortages, supply chain issues and financing issues. We expect to see clients contacting us:

  • To review and advise as to their termination rights under existing contracts;
  • To draft contracts on new projects with a view to addressing COVID-19 related concerns;
  • To seek advice on delay claims and related cost-consequences relating to projects underway and which have been impacted by COVID-19.

If you are concerned about your construction project finishing on time, or if you are embarking on a new contract and are uncertain how to proceed in light of COVID-19 complications, please contact us to assist you in addressing these complex and unprecedented matters.

CONTRACTUAL RELIEF

Whether or not there is relief available to you will depend on the specific wording of the contract as well as the circumstances of your particular case. Parties often look to force majeure provisions which may be different in each contract.

We had previously provided a detailed article on force majeure, frustration, cancellation and material adverse change. We encourage you to review this article https://www.pitblado.com/force-majeure-frustration-cancellation-material-adverse-change to understand contractual obligations in the context of COVID-19.

In the construction industry, the CCDC 2 contract provides the following force majeure clause:

6.5.3 If the contractor is delayed in the performance of the work by:

.1 labour disputes, strikes, lockouts (including lockouts decreed or recommended for its members by a recognized contractors’ association, of which the contractor is a member or to which the contractor is otherwise bound);

.2 fire, unusual delay by common carriers or unavoidable casualties;

.3 abnormally adverse weather conditions; or

.4 any cause beyond the contractor’s control other than one resulting from a default or breach of contract by the contractor;

then the contract time shall be extended for such reasonable time as the consultant may recommend in consultation with the contractor. The extension of time shall not be less than the time lost as the result of the event causing the delay, unless the contractor agrees to a shorter extension. The contractor shall not be entitled to payment for costs incurred by such delays, unless such delays result from actions by the owner, consultant or anyone employed or engaged by them directly or indirectly.

While pandemics are not specifically considered in the context of this clause, we are living in unprecedented times, and time will tell whether or not COVID-19 will qualify as falling under “any cause beyond the contractor’s control…”.

We encourage all parties to a contract to consult with us to determine their rights under their existing or prospective contracts so that you can be fully apprised of your legal rights and obligations with respect to cancellation, force majeure clauses, delay claims and time limits for notification of claims.

 

Please do not hesitate to contact your relationship partner or lawyer if you have any questions or if we can be of assistance in guiding you through these new challenges.

This article was prepared by:

KAREN POETKER
PARTNER
204.956.3571
[email protected]

This article represents general information and is not legal advice. Please contact us if you would like legal advice that is tailored to your particular circumstances. We would be happy to help.

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