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Legal - Taking cover after the storm

image Angela A.L. Connor, Associate/Houston Office, Peckar & Abramson, Austin, TX

AUSTIN - This hurricane season is on track to be one of the most active seasons of record. Hurricane Harvey hit a vast portion of the Texas coast and affected numerous construction projects. A hurricane of this magnitude results in delays and added costs to projects. As projects get back on track after Harvey, contractors should re-review their contracts to ensure compliance with all notice and documentation requirements, if there is a time and/or cost impact caused by the storm.

 

     A hurricane and other “acts of God” are usually known as force majeure events.  A force majeure event is an unavoidable circumstance beyond a contractor’s control.  Depending on the contract language, if a force majeure event occurs, a contractor may be entitled to additional time and/or costs. 

Notice


    In a typical construction contract, there are notice requirements to receive time and money for delays not caused by the contractor.  It is critical for contractors to immediately review the contract’s notice requirements to ensure compliance.  Contractors should also check the contract to make sure the notice is sent in the correct form, to all required recipients, and contains all necessary content.  The notice should explain the cause for the delay and reserve rights for time and money.  It is important to note that time delay is not only the actual period of the storm.  Contractors need to take into account the limited access to the project site, changes conditions at the project site (e.g. muddy conditions), and demobilization and remobilization time.  Additionally, contractors should consult with their subcontractors and suppliers.  A shortage of labor, materials and/or equipment would likely cause more delay than the actual storm. 
    By now, contractors likely know the full effect of the storm’s aftermath to their project schedule and costs.  Contractors will now need to send a supplemental notice detailing the additional time and costs.  Under the AIA Document A201TM – 2007 General Conditions (“A201”), an extension of time and additional costs are altered by a change order.  This means documentation is required. 

Documentation

    To be entitled to time under the A201, the contractor must show there was a delay or delays to the project’s critical path.  If time is requested due to adverse weather conditions, the contractor must also submit “data substantiating the weather was abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction.”   Examples of backup would include NOAA reports and other data showing the actual rainfall at the project site and flooding in the area.  A revised schedule should also be submitted along with the adverse weather data. 
    To receive additional cost under the A201, the contractor must submit a complete itemization of costs, labor and materials.  A contractor should submit time sheets, payroll records, source documents for costs, and have their subcontractors submit the same itemized documentation.  The more documentation a contractor can include the better chance they have of getting additional time and money. 
    Lastly, there are usually time limits to submit the documentation for change orders.  It is imperative for contractors to scrutinize their contracts and determine the applicable time period to submit the documentation.
    While hopefully we will never see another storm like Harvey again, there will be future force majeure events.  Complying with all notice requirements and submitting detailed documentation will help prevent a disaster to your bottom line.

    Angela Connor is a construction lawyer in Peckar & Abramson, P.C.’s Houston office.  She represents a wide range of construction industry clients and focuses her practice on construction-related disputes and contract negotiations and drafting.  Angela can be contacted at aconnor@pecklaw.com or 281.953.7705.

                                             

1AIA recently released the 2017 version of the AIA Documents.  This article focuses on the 2007 version because most ongoing projects are contracted under the 2007 version.


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Kim Estes austineditor@constructionnews.net