DFI Magazine September/October 2020 - 121

L E G A L LY

SPEAKING

Change Principles and Compensation for COVID Impacts
In the May/June 2020 issue of Deep
Foundations, this column addressed
COVID-19 delays and impacts and
possible contractual, statutory, common
law and insurance relief available to
contractors for these impacts. That article
discussed COVID-19 impacts as force
majeure ("superior force") events.
Elsewhere, much has been written about
whether a contractor is entitled to time
extensions and additional compensation
for these delays and impacts. The
consensus, supported by substantial
jurisprudence and owner action, is that,
absent a contract clause to the contrary,
COVID-19 impacts constitute force
majeure events for which a contractor is
entitled to contract time extensions, but no
additional compensation.

Relief Otherwise
This general rule, however, does not address
all COVID-19-related circumstances and
should not end the contractor's inquiry. A
threshold question a contractor should
consider in determining available relief is
whether the impacts are truly caused by the
force majeure event (COVID-19) itself or
instead by the independent directives or
other acts of the owner (or prime contractor
in the case of a subcontractor). While
COVID-related work restrictions imposed
by a state or local government would clearly
be a force majeure event, an owner's
independent precautionary work restrictions arguably are not. Although the Centers
for Disease Control and Prevention and
Occupational Safety and Health Administration have issued recommendations for
workplace safety related to the novel virus,
the federal government has not mandated
workplace restrictions. The few states that
have mandated social distancing and the use
of masks have done so only recently, and
several have not applied these requirements
to workplaces beyond restaurants,
barbershops, gyms and retail stores. While it
may be (almost certainly is) prudent for an
owner or contractor to impose distancing,

personal protective equipment
(PPE) and other work restrictions,
these requirements may nevertheless be changes to the conditions of the work and the contract.
To the extent these changes
delay, disrupt, make less efficient
or otherwise impact the work, the
contractor may be entitled to
additional compensation for these
directed changes under contractual changes clauses or as constructive changes recognized by
law. The greater the work
restrictions and the more attenuated they are from an absolute
necessity, the more likely the
contractor would be to recover
additional costs (and time). Also,
if the work restrictions make the work
unfeasibly difficult or excessively costly to
perform, a contractor may be entitled to
compensation under the common law
doctrine of commercial impracticability (see
the May/June column).

Brian Wood
Partner
Smith Currie

The greater the (COVID-19) work
restrictions and the more attenuated
they are from an absolute necessity,

the more likely the contractor would be
to recover additional costs (and time).

Damage Mitigation
Another consideration in determining
recovery for COVID-19 impacts is the
extent to which the contractor is
contractually or legally obligated to
mitigate damages. The common law in
most jurisdictions imposes a duty on an
injured/damaged party to exercise
reasonable care to minimize damages,
however caused. Failure to take steps to
mitigate damages can bar a harmed party
from recovering from the impacts. Absent
specific contract language addressing
mitigation, the general rule is that a
contractor should exercise ordinary care;
that is, what an ordinary prudent
contractor would do under the same or
similar circumstances to minimize
damages. Importantly, this generally does
not mean that a contractor is required to
take all possible actions that might possibly
reduce the damages.

Limitations on the duty to mitigate are
important to consider when dealing with
COVID-19 impacts. Imagine a situation
where COVID-19 has caused a substantial
delay to the delivery of equipment or
materials a contractor has planned to use
on a project. As a starting point, we would
consider this a force majeure event for
which the contractor would likely be
entitled to a time extension.
Fulfilling the duty to mitigate damages,
however, would likely require the
contractor to search for alternative sources
of supply. What if all alternative sources of
the materials and equipment would result
in a substantial increase in the cost of
performance? What if there are not sources
of like materials and equipment, and a
substitution would require changes to the
planned means and methods of performance? Of course, these are case-specific,
fact-intensive questions with no guaranteed answers. However, the duty to mitigate generally would not require the
contractor to absorb substantial increases
to the contract price for these COVIDcaused impacts. While a contractor would
likely only be entitled to a noncompensable
time extension for delays for the originallyplanned material or equipment, an owner's
DEEP FOUNDATIONS * SEPT/OCT 2020 * 121

DFI Magazine September/October 2020

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