Texas Construction Law Blog

The spread of COVID-19 has severely impacted our nation and economy. We are facing lockdowns, travel bans, and massive disruptions to day-to-day activities as authorities work to stop the spread of COVID-19. As the virus-related impacts spread, parties are likely to find it increasingly difficult to meet their contractual obligations. This means that now is the time to take action and preserve your rights under your existing construction contracts.

Force Majeure Clauses

One of the ways to respond to performance issues caused by COVID-19 is to review your existing contracts and determine whether they contain force majeure clauses. This is important because the general rule in Texas is that an act of God or a natural disaster does not relieve the parties of performing their contractual obligations unless the parties expressly provide otherwise in the contract. ^[1]  This means that if you are unable to perform on a project due to COVID-19, you are not automatically shielded from suffering the consequences of your non-performance. Accordingly, “[t]o avoid liability for acts of God, contracts frequently contain force majeure clauses, which are enforceable under Texas law.” ^[2] 

The general purpose of a force majeure clause is to excuse non-performance of obligations when the non-performance is caused by circumstances beyond the reasonable control of the party or by an event which is unforeseeable at the time the parties entered into the contract. ^[3]  However, it is important to remember that “[t]he scope and effect of a ‘force majeure’ clause depends on the specific contract language, and not on any traditional definition of the term.” ^[4]  As a result, whether or not an event rises to the level of a force majeure event is “utterly dependent upon the terms of the contract in which it appears.” ^[5]  Thus, when the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of the force majeure clause and reviewing courts are not at liberty to rewrite the contract or interpret it in a manner which the parties never intended. ^[6] 

If you review your contract and find a force majeure clause, your next step should be to review it carefully to determine whether the description of a force majeure event covers something along the lines of a viral outbreak or government imposed lockdown. You should also determine whether you have to give notice after the event begins to invoke the protections of the clause. This is important because there are often notice requirements and deadlines that are included in force majeure clauses, and compliance with them may be a condition precedent to seeking relief under the clause. You should look for any requirements to give notice within a certain amount of time after an event and determine whether notice must be given to a specific person or sent in a specific way, e.g. by certified mail to a specific person at a specific address. In short, you should carefully review your contracts and determine whether there is any immediate action that must be taken to secure your rights.

Impossibility of Performance

If your contract does not contain a force majeure clause, all hope is not lost because impossibility of performance is a defense to a breach of contract claim. ^[7]  The defense may be asserted when supervening circumstances, such as a governmental regulation or order, make a party's contractual performance impracticable or impossible. ^[8]  So, if government imposed shutdowns make it impossible for you to perform on a construction contract, you may have a defense to a future breach of contract claim, and you should be working now to document the impacts suffered on your projects and to document your efforts to determine workarounds and to overcome the challenges you are facing. Real-time documentation will make it much easier to reconstruct the impacts suffered and the changes being made as we all work to deal with a rapidly evolving situation.