Force Majeure Clause In A Construction Contract

Contract Teardown

Companies and individuals have become more aware of force majeure since the Covid-19 pandemic. But with all this talk of foreseeability, do you even need a force majeure clause in a contract?

 

Gretchen Cothron joined the Contract Teardown to dig into this issue. She is a legal consultant who specializes in criminal defense, civil rights, and contract law. 90% of her work revolves around working with other attorneys. With her experience in conducting consultations for complex cases, she has come across a number of force majeure clauses. She uses the example of a pre-covid pipeline project contract to understand the considerations involved in a functioning force majeure clause.

Questions in this Episode

  1. How have force majeure clauses changed with COVID-19?
  2. What makes a good force majeure clause?
  3. What should you avoid when drafting a force majeure clause?
  4. How to negotiate better force majeure clauses in construction contracts?
  5. How does foreseeability affect drafting language?

COVID-19 and Force Majeure

We chose the Corpus Christi pipeline contract since it’s a substantial document with a lot of detail. With the stakes so high in a contract like this, you can expect them to go crazy and use every word they can think of.

 

What is force majeure? It’s an old French term. It denotes an enormous amount of strength that you would be unable to overcome. Force majeure clauses are critical, and we’re hearing more about them as a result of COVID and other global events disrupting contracts.

 

A big change right now is people acknowledging that they need some type of escape valve. Many people in Florida have signed contracts shortly before COVID, but this has disturbed the entire purpose of the contract, and now they’re backpedaling, trying to figure out how to get out of them. If you don’t have a force majeure clause or an escape valve in your contract, you could wind up losing a lot of money and other things while being unprotected by it.

Force Majeure Within Change Orders: Does That Work?

The change order process is the procedure for obtaining relief in the event of a force majeure event, which is why it’s normal for it to fall under the change order section.

When this contract was written, it was 2016, so it was pre-COVID. They did, however, have the foresight to include a force majeure clause in the contract, considering the intricacy of the agreement and the project they were working on. However, because it falls within the change order clause of the contract, the contractor has a very specific mechanism to obtain relief.

Drafting a Good Force Majeure Clause

Include Detailed Definitions

The amount of thought they put into defining force majeure is impressive. However, it was drafted pre-COVID, so they don’t differentiate in their clause between epidemic and pandemic, which are two different things.

“In a force majeure clause, I believe it is necessary to state all the horrible things that could disrupt the project. With this pipeline project contract, they did exactly that.” - Gretchen Cothron #ContractTeardown Click To Tweet

Avoid These When Drafting Force Majeure Clauses

One-sided Language

Section B is clearly written for the advantage of the owner. It offers the owner complete freedom to do anything they want. They have suspended their obligations.


6.8 Force Majeure. B. Owner Relief. Subject to Section 6.8C, Owner’s obligations under this Agreement shall be suspended to the extent that performance of such obligations is delayed by Force Majeure. C. Payment Obligations. No obligation of a Party to pay moneys under or pursuant to this Agreement shall be excused by reason of Force Majeure.

Consider a shift in the political winds that would make this project difficult to complete. If they don’t want to pay you because of force majeure, they don’t have to. However, as you can see from Section A, the contractor is expected to continue working as much as they can and try to get around the force majeure event.

In general, the change order section of 6.2 appears to give the owner a lot of power over the contractor. Article six was clearly designed for the owner’s advantage, not the contractor’s.


6.2 Change Orders Requested by Contractor. A. Contractor shall only have the right to request a Change Order in the event of any of the following occurrences: 1. Force Majeure to the extent allowed under Section 6.8A; 2. Acceleration of the Work ordered by Owner pursuant to Section 5.6; 3. Suspension in Work ordered by Owner pursuant to Section 14.3; 4. Owner’s failure to provide (i) Site access in accordance with the schedule included in Attachment M, or (ii) Owner-Supplied Equipment in accordance with the schedule in Attachment N; 5. Incomplete, inaccurate or inadequate information in the Scope of Work or Design Basis listed in Attachment A (including all Drawings and Specifications) or in any additional design information provided by Owner (including any additional Drawings and Specifications and updates thereto) that has a material adverse effect on Contractor’s cost of performing the Work or ability to perform any obligation under this Agreement (and with respect to delays, to the extent permitted under Section 6.9), subject to Section 2.5A and provided that Contractor has complied with all requirements of Section 2.5A (including with respect to notice); or, 6. To the extent expressly permitted under Section 2.5B.1, Section 2.5E, Section 6.4, Section 6.9, or Section 12.2A. B. Should Contractor desire to request a Change Order under this Section 6.2, Contractor shall, pursuant to Section 6.6, notify Owner in writing and issue to Owner, at Contractor’s expense, a request for a proposed Change Order in the form of Schedule D-3, a detailed explanation of the proposed change and Contractor’s reasons for proposing the change, all documentation necessary to verify the effects of the change on the Changed Criteria, and all other information required by Section 6.6. C. If Owner agrees that a Change Order is necessary and agrees with Contractor’s statement regarding the effect of the proposed Change Order on the Changed Criteria, then Owner shall issue such Change Order, which shall be in the form of Schedule D-1, and such Change Order shall become binding on the Parties as part of this Agreement upon execution thereof by the Parties. Owner shall be entitled to decline a Change Order with respect to any request by Contractor for a Change Order if the Change Order request, when submitted, is not adequately documented and supported by Contractor as required under this Agreement. D. If the Parties agree that Contractor is entitled to a Change Order but cannot agree on the effect of the proposed Change Order on the Changed Criteria within thirty (30) Days of Owner’s receipt of Contractor’s 24 written notice and proposed Change Order and all other required information, or if Owner desires that the proposed changed Work set forth in the proposed Change Order commence immediately, the rights, obligations and procedures set forth in Section 6.1C are applicable. E. If the Parties cannot agree upon whether Contractor is entitled to a Change Order within thirty (30) Days of Owner’s receipt of Contractor’s written notice and proposed Change Order, then the dispute shall be resolved as provided in ARTICLE 16. Pending resolution of the dispute, Contractor shall continue to perform the Work required under this Agreement, and Owner shall continue to pay Contractor in accordance with the terms of this Agreement, any Change Orders and any previously agreed or unilateral Change Orders.

You see something different here that you don’t see very often. 6.1 (C) lays out what occurs if there is a disagreement over a change order’s timing and you don’t see that in many contracts. They’ll just say that the decision is up to the owner. The contractor then simply needs to wait and see what the owner decides, but this does set time limits in the case that the owner and the contractor disagree.


C. If the Parties cannot agree on such Changed Criteria of the proposed Change Order within ten (10) Business Days of Contractor’s receipt of Owner’s proposed Change Order, or if Owner desires that the proposed changed Work set forth in the proposed Change Order commence immediately without the requirement of a written statement by Contractor as required under Section 6.1A, Owner may, by issuance of a unilateral Change Order in the form attached hereto as Schedule D-2, require Contractor to commence and perform the changed Work specified in the unilateral Change Order, at Owner’s option, either (i) on a time and materials basis using the rates set forth in Schedule D-4 or, if not therein, at rates not to exceed then-current market rates with the effect of such unilateral Change Order on the Changed Criteria (or if the Parties agree on the effect of such unilateral Change Order for some but not all of the Changed Criteria, the impact of each of the components of the Changed Criteria on which the Parties disagree) to be determined as soon as possible, or (ii) 23 in accordance with the outcome of the dispute resolution procedures set forth in Article 16; provided, however, that Contractor shall perform the Work as specified in such unilateral Change Order and Owner shall continue to pay Contractor in accordance with the terms of this Agreement and any previously agreed Change Orders pending resolution of the Dispute. When Owner and Contractor agree on the effect of such unilateral Change Order on all of the Changed Criteria, such agreement shall be recorded by execution by the Parties of a Change Order in the form attached hereto as Schedule D-1, which shall supersede the unilateral Change Order previously issued and relating to such changed Work. Contractor shall be considered to be in Default under Section 14.1 should it (i) fail to commence the performance of the changed Work or other obligations required in such unilateral Change Order within five (5) Business Days of receipt of such unilateral Change Order (or within such other time specified in such unilateral Change Order) or (ii) fail to diligently perform the changed Work or other obligations required in such unilateral Change Order. D. If Owner omits Work by a Change Order, Owner may subsequently perform such Work itself or have it carried out by other contractors and any one or more omissions will not constitute a basis to allege that Owner has repudiated or breached this Agreement, no matter the extent or timing thereof. In determining the amount to be deducted from the Estimated Total Contractor’s Compensation for any change that results in a savings to Contractor, such deduction will include a reasonable sum for Contractor’s overhead and profit.

Bypassing Post Force Majeure Obligations

Section 6.8 discusses payment obligations, stating that if you’re the owner, your only responsibility is to write a check in the event of a force majeure. However, responsibilities such as the delivery of any goods, bringing staff, or any other obligations, are totally off the owner.


6.8 Force Majeure. A. Contractor Relief. If the commencement, prosecution or completion of any Work is delayed by Force Majeure, then Contractor shall be entitled to an extension to the Guaranteed Mechanical Completion Date if such delay affects the performance of any Work that is on the critical path of the CPM Schedule and causes Contractor to complete the Work beyond the Guaranteed Mechanical Completion Date, but only if Contractor is unable to proceed with other portions of the Work so as not to cause a delay in the Guaranteed Mechanical Completion Date, and Contractor complies with the notice and Change Order request requirements in Section 6.6 and the mitigation requirements in Section 6.11. The Parties agree that Contractor’s sole remedy for such delay shall be an adjustment to the Guaranteed Mechanical Completion Date pursuant to a Change Order. Any adjustment to the Guaranteed Mechanical Completion shall be recorded in a Change Order. B. Owner Relief. Subject to Section 6.8C, Owner’s obligations under this Agreement shall be suspended to the extent that performance of such obligations is delayed by Force Majeure. C. Payment Obligations. No obligation of a Party to pay moneys under or pursuant to this Agreement shall be excused by reason of Force Majeure.

This isn’t good because if you’re under the control of the government, say the government tells you to cease working on the pipeline. How are you turning in those receipts or all of your commitments to the owner to collect that payment if you’re out there working? All of your summaries and invoices will not be paid if you are unable to turn them in. So, it’s simple for them to say, “Well, the owner still has to pay.”

We’ve seen many lawsuits come up in Florida on account of construction project delays. Contractors had to continue to pay for different things but were not able to do any of the work due to COVID.

“Bypassing post force majeure event obligations can hurt the contracting company because they have to continue paying the workers for all the equipment, cranes, and rentals while the owners don’t pay them for that.” - Gretchen Cothron #ContractTeardown Click To Tweet

Ask for More as a Contractor

Even though this section has numerous caveats and risks to the contractor receiving relief, it is well-written since you do not want to offer the contractor an open-ended contract. They’re arguing that if there are other parts of the project that may be completed, don’t put everything on hold just because of one event, such as COVID. That’s an excellent point to add.


6.8 Force Majeure. A. Contractor Relief. If the commencement, prosecution or completion of any Work is delayed by Force Majeure, then Contractor shall be entitled to an extension to the Guaranteed Mechanical Completion Date if such delay affects the performance of any Work that is on the critical path of the CPM Schedule and causes Contractor to complete the Work beyond the Guaranteed Mechanical Completion Date, but only if Contractor is unable to proceed with other portions of the Work so as not to cause a delay in the Guaranteed Mechanical Completion Date, and Contractor complies with the notice and Change Order request requirements in Section 6.6 and the mitigation requirements in Section 6.11. The Parties agree that Contractor’s sole remedy for such delay shall be an adjustment to the Guaranteed Mechanical Completion Date pursuant to a Change Order. Any adjustment to the Guaranteed Mechanical Completion shall be recorded in a Change Order.

The Force Majeure Big Picture: Foreseeability

We are all really good at foreseeability in retrospect. The broader view on force majeure clauses is that they are necessary and must be detailed like the one we just discussed. Adding language to indicate both unforeseeable or foreseeable events is a good practice. Because can you foresee another COVID mutation or a huge outbreak? You probably don’t know and you can’t foresee that now.

 


In this episode of the Contract Teardown Show from Law Insider attorney Gretchen Cothron tears down a very long and detailed agreement that shows how a Force Majeure Clause can undermine everything.

 

THE CONTRACT

 

THE GUEST: Gretchen is a legal and forensic consultant, and she provide services to attorney and law firms in the areas of contract law and criminal law. Her educational background is undergrad degrees in Forensic Science and Criminology, and also a law degree. She has taught courses and seminars around the world, but focus on consulting and writing on cases within the USA.

 

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

 

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

 

Mike Whelan [00:00:46] Gretchen Cothron, thank you for joining the contract tear down show. How are you today?

 

Gretchen Cothron [00:00:50] I’m doing excellent. Thank you for having me.

 

Mike Whelan [00:00:53] Absolutely, Gretchen. We are talking about a big old project, a pipeline specifically the Corpus Christi pipeline project. And we’re going to focus on one specific clause the force majeure clause, which is of interest right now. But I’m looking at this construction agreement for the Corpus Christi pipeline. Before we dig into force majeure specifically, what is this document? When are we going to see this kind of thing?

 

Gretchen Cothron [00:01:16] So this particular document, as you said, it’s a large construction document, and I chose this one because of how detailed it is and given the problems with COVID right now, I think it’s very important to really focus on force majeure clauses in contracts.

 

Mike Whelan [00:01:34] Yeah. With the stakes in a contract like this, I mean, you can expect that they’re going to go crazy and put every word that they can possibly think of. They just threw a dictionary at this thing. The force majeure clause is actually located down in section six and and we’ll talk about that. But before we jump to that bit, tell us about you. What’s your background? What kind of practice do you have? Tell us about your work.

 

Gretchen Cothron [00:01:55] Thank you. So my work, I am a legal consultant. My background is I specialize in criminal defense, civil rights and contract law. And I would say 90 percent of my clients are other attorneys. I mainly conduct — I do consultations for other attorneys to help them on complex cases. I write briefs and things like that.

 

Mike Whelan [00:02:18] Great. So you’re doing a lot of this legal research and writing this stuff. This is if I can prop up my book over here. This is what I call the legal supply chain in my book in action, right? Everybody sort of being great at their thing and connecting with other people. So I love it. All right. Well, because you’re a super nerd and that’s legit what your job is now. We’re going to jump into the super nerd-dom. There’s been a lot of talk lately about force majeure clauses, and you’ve written an e-book on that for Law Insider that will make sure to talk about later and include in the show description. But before we, you know, sort of dig into this particular document, give us some brief background on the force majeure clause. We’ve all heard of it lately. We all roughly know what it is. But what’s the special conversation that is being had around force majeure right now? That matters?

 

Gretchen Cothron [00:03:02] Well, what it is, it’s an old French term. It literally means like, the strength, so much strength that you can’t overcome it. Superior strength, if you will. So force majeure clauses, they’re very important. We’re hearing about them now because of COVID and other things going on around the world that are disrupting contracts. They are, I think the important thing to know is that they’re different than what we call acts of God, because a force majeure event can be an act of nature, or it can also be an act of a governmental agency. And we are seeing that distinction now in lawsuits.

 

Mike Whelan [00:03:51] Yeah. I mean, we’re in as you and I are speaking right now, we’re in the middle of wartime and there’s all kinds of contracts that surely are affected by it, which is different than the weather changed. But to your point. You know, we need something to deal with the fact that the parties had an intention when things started and then the context changed and now their original intentions just are not that relevant. And we need to talk about how to preserve those intentions but deliver in a different way. And so I would actually point out, as we talk about it, is that in this particular document we’re talking about the force majeure clause is inside the change order process. It is a change. So we’ll talk about that. But before we do a bit about COVID, about this is, you know, we’ve had several conversations about force majeure clauses. People are talking about this. Average Joes are watching the news and know that this is a thing now. Like my kids, OK, my kids don’t care about anything that I do, but maybe my kids have been told something about the people are hearing about this now. How has COVID changed the environment and what’s different about sort of these health crises?

 

Gretchen Cothron [00:04:57] Yes, a big change right now is people need — they acknowledge that they need some type of escape valve, I guess and, events to get out of contracts you might have entered in, I’m seeing a lot on in Florida where I’m from now, where a lot of people have entered into contracts just prior to COVID, but COVID disrupted the entire purpose of the contract, and now they’re backpedaling, trying to figure out how to get out of the contracts. And if you don’t have that force majeure clause or that escape valve, you might end up suffering a lot of losses, monetary and otherwise and not be protected by your contract.

 

Mike Whelan [00:05:45] Hmm. Yeah. We’ll talk more in a bit about the purposes of these sections and whether they’re useful. I’m curious your take on it, but let’s jump to the contract. OK, so I’m jumping down to Section six now. The force majeure clause, as I mentioned, is found within Section six, but Article six is not called Force Majeure. Article six is called changes, force majeure, and owner caused delay. What does it mean to you that the force majeure bit is actually inside change orders surrounded by this whole change order conversation?

 

Gretchen Cothron [00:06:18] So that gives the change order process is the process by which to get relief in the event of a force majeure event and with it being in, this is a normal process. This is normal. This was a 2016 contract when this was written, so it was pre-COVID. But given the complexity of this contract and this project they were doing, they did have the foresight to put that force majeure clause in the contract. So I think that that’s very important. However, with it being under the change order section, this contract has prescribed a very distinct and outlined way for the contractor to get relief.

 

Mike Whelan [00:07:11] Yeah, and I would point out in 6.2A it literally says the contractor, you know, because there’s two sides who can request changes, but specifically the contractor can only be entitled to a change order in the event of force majeure under 6A as we’ll talk about, acceleration of the work ordered by the owner, suspension in work ordered by the owner and to the extent permitted under some other sections. This change order section in general seems to give a lot of power not to the contractor, but but to the owner.

 

Gretchen Cothron [00:07:43] Correct. This this Article six is almost completely — it was definitely written for the benefit of the owner, not the contractor. I will say something interesting that you don’t see all the time is in 6.1 Subsection C, it does give a layout of what happens if there, for timing, if there is a disagreement on a change order and you don’t see that in a lot of contracts. They will just say that it’s up to the owner. And then the contractor just has to wait and see what the owner decides, but this does give lays out time limitations in the event of a bit of a disagreement between the owner and the contractor.

 

Mike Whelan [00:08:32] Right? Well, as we jump to Section six — 6.8 to talk about the force majeure, let’s jump back to the definitions. I’m looking in force majeure under the definitions. And boy, that is a paragraph. Catastrophic storms or floods, tornadoes, hurricanes, earthquakes, other acts of God, war, civil disturbances, terrorist attacks, revolts, insurrection, sabotage. I made the joke before that. Like, unless you say Ant-Man crushed my building when he was giant Ant-Man. Then people seem to think that force majeure doesn’t apply unless you specifically, you know, Ant-Man walks through your building. This is a really long paragraph on what force majeure means. Did you have any thoughts on, you know, kind of the depth that they go to to describe force majeure?

 

Gretchen Cothron [00:09:15] I did. I like the detail that they went into. I do think listing everything and we call this the parade of horribles, right? The horrible things that can happen to disrupt the project. And this you could tell that they were really looking at the pipeline at this being Corpus Christi, Texas. They were looking at things that might affect that specific, I think it was a 21 mile pipeline. So that’s great. I like how detailed it is. But again, it does — this is pre-COVID, so they don’t differentiate in their clause between epidemic and pandemic, which are two different things.

 

Mike Whelan [00:09:59] Right? Yeah. And I just as an aside, I lived up the street from Corpus Christi right before Hurricane Harvey made landfall and destroyed where I lived, which was Rockport, Texas. And so, you know, when you’re in Texas, on the coast, you know, when you’re dealing with these oil pipelines, you know, this stuff is real. They do say, you know, it’s got to be an event that delays or renders impossible the performance. And it’s beyond the reasonable control of the affected party, not due to fault or negligence. Obviously, even in their definition of force majeure, it’s  about obligations, right? They’re not just saying, Oh man, all this bad stuff happened. They’re still distributing the obligations of the different parties in interesting ways. You know, in our previous conversation, the question is if you put a parade of horribles, are you now responsible for that parade of horribles like if you left something out? Right? So if you didn’t include Ant-Man, are we in trouble? Well, let’s jump down to 6.8. I’m going to go to A and again, we talked about, you know, how sort of limited the contractor’s ability to, you know, how one sided this contract is. Well, A shows you that there’s a really long paragraph of qualifiers on contractor relief. If the commencement, prosecution or completion of any work is delayed by force majeure, then contractors should be entitled to an extension, et cetera, et cetera, but only if a contractor is unable to proceed with other portions of the work, et cetera. There’s a lot of caveats and addenda to the contractor getting relief. What do you think about this section? About Section A under 6.8?

 

Gretchen Cothron [00:11:37] This section? It’s well-written because I would I would not want to give the contractor just an open end. So I understand what they’re doing. What they’re saying is that if you could do other portions of the project, get those done, don’t stop everything just because of this one event, such as COVID. If this was going on, if they were able to do some things that weren’t affected by government regulations or quarantines, they should still be getting those things done. That I agree with. The problem I see here, though, is that the sole remedy for the contractor and that would flow through to its subcontractors is an extension of time to complete the project. And if I was an attorney representing the contractor, I would try to negotiate this to get maybe monetary relief for equipment rental staff, things like that also.

 

Mike Whelan [00:12:39] Yeah, you can imagine a change in the political winds that would make this, you know, delivering this project impossible. And how does the contractor get any kind of relief in that situation? Well, in contrast, 6.8 B owner relief is very short, subject to section 6.8 C, which we’ll talk about in a second. The owner’s obligations under this agreement shall be suspended to the extent that performance of such obligations is delayed by force majeure. So Force Majeure contractor sorry, still do all the stuff except for, you know, and the owner force majeure. I mean, I can’t do anything. What do you think about Section B here?

 

Gretchen Cothron [00:13:17] Definitely written for the owner’s benefit because it does so the owner. It gives the owner free, free right to do anything. You know, their — all their obligations are suspended. They don’t have to pay you if they don’t want to because of force majeure. But yet, as you saw in Section A, the contractor is expected to still work as much as they can and try and get around the force majeure event. So I I would have had a problem with this if I was negotiating this contract on behalf of the contractor.

 

Mike Whelan [00:13:54] Well, but it does say subject to section 6.8C Which talks about the payment obligations. It says no obligation of a party to pay moneys under a pursuant to this agreement shall be excused by reason of force majeure. So if you’re if you’re looking at the pile of responsibilities on the owner, it sounds like the only thing that they’re saying we’re going to keep doing in the event of force majeure is we’re going to like, write a check. But anything else, you know, delivery of any materials or bringing of any staff or whatever else is in this, you know, 100 page document, whatever other obligations are on the owner or actually off the owner in the event of force majeure — what do you think about that, about the owner basically saying, Hey, man, we’ll keep writing the checks, but all the rest of it, you’re on your own.

 

Gretchen Cothron [00:14:37] Yeah, it’s and it’s not good because you think about if you’re under a government, say the government tells you you have to stop work on this pipeline if you’re out working, how are you turning in those receipts or turning in all of your obligations to the owner to get that payment? If you’re unable to turn in all of your summaries, all of your invoices, then you’re not getting paid, so for them to just say, well, the owner still has to pay.

 

Mike Whelan [00:15:10] Right. Yeah, and I’m imagining, you know, when I lived down there, a lot of my clients were in the military. There’s a pretty big military presence down there, and you just imagine the situation where a bunch of these guys and they were most the guys who worked on rigs were also in the military. So if things in Ukraine go sideways and as you can imagine, a force majeure event, there’s a war in Poland and all these guys are called up well, now the labor force in that area, who can go do the jobs that are on here is significantly reduced. So the cost of the labor force has gone up an insane amount. Sure. The owner has said we’ll give you the money we talked about before, but the actual cost to deliver has gone up like crazy, that your ability to get resources, to get even the equipment to be able to go deliver on this thing. I mean, it’s totally changed like things for the checks, but. And that’s helpful. But that doesn’t really get to all the core problems,

 

Gretchen Cothron [00:16:07] No, and that’s if you can get the checks. So I have seen — a big problem that I saw in the Southeast and in Florida, I’ve seen some lawsuits popping up now that I’ve I’ve looked at in Florida, where in Florida there was a stop in March of 2020 and they said, OK, stop everything. We’re going to start back up in May and then May comes, oh wait. Now we’re going to start in June. So that delay what it caused on construction contracts was that the contractors still had to pay for all the equipment, all those cranes and everything that they had on rental and keep  rented the equipment and keep all their construction workers on contract and paid. But they weren’t able to do any of the work. And when this went on again and again, and I want to say until the end of August 2020, when when construction really picked back up, the owners say, Hey, look at the contract. All all we’re obligated to give you is an extension of time. And some of the contractors were trying to sue saying, Hey, but wait, we had to keep all this, all this staff on. We had to keep paying for the equipment rentals and we’re not getting any compensation for that. So it really hurts the contracting company.

 

Mike Whelan [00:17:35] Yeah, I think it’s interesting, you know, as we step back and think about the bigger picture of the force majeure clauses, and we’ve talked about that on this show a couple of times where we’re like, Do we need this thing? Can we rely on the common law? And I want to get your take on that. But just in terms of what’s coming, look at this moment in history, you know, the funny thing about COVID is the number of people who are saying, either man, we could have never seen this coming versus the people who are like, We’ve been telling you this is coming for years, you know, same that’s going on in Ukraine, where you hear some people saying, Oh, we never could have imagined Putin doing this and other people saying, Well, this was so obvious that this was going to happen. We are all really good at foreseeability in retrospect. So tell me about the risk or how you balance the risk of adding a force majeure clause, how much meat you want to add to it. Do you think we even need it? What’s the value of having it versus relying on the common law? Because if it was truly foreseeable, then you know, we wouldn’t have this problem. What do you think about using force majeure clauses broadly?

 

Gretchen Cothron [00:18:37] I think that they are necessary. I would detail it to the specific project like this one we saw was detailed to the pipeline in southern Texas project. So I would detail it and I would put language in that says foresee unforeseeable or foreseeable just because we are now that we’re experiencing COVID, do we say now we’ve had so many different mutations? You can’t really say we’re not. You can’t foresee another mutation or another huge outbreak of it, and we can’t foresee that now. But do we just say, Oh, well, you’re screwed because we know that it could happen? So no, I would just. Keep it in there and put the language, it says in the event unforeseeable or foreseeable instances.

 

Mike Whelan [00:19:28] Well, and you wrote an e-book on using force majeure that we’ll be releasing at law insider slash resources will email that out as well. But tell us briefly about the e-book. I I mean, I assume you’re laying that argument out of why we need this thing, and here’s best practices for using it. Is that basically what the book covers?

 

Gretchen Cothron [00:19:46] Yes. Yes, I explain briefly what it is, the history of it, why it’s necessary, and I do go into detail some of the common law. If you choose to leave out the clause, which I would not recommend some of the common law, laws that you can work with, but I would. And then I go into force with short clauses and why? Why they are important and different. I mean, look at the supply chain issues and also now what we’re seeing with Russia and Ukraine. You know, often there are things happening that. We might not think would impact something that we’re contracting on today, but six months down the road. You know, it blows up your whole contract. Nothing, nothing is working anymore.

 

Mike Whelan [00:20:33] Yeah, we don’t know. Well, we will include information for that below and also over at law insider slash resources, we’ll have the blog post for this, including links to the contract that we talked about to Gretchen’s e-book and to contact information. Gretchen, what’s the best way for people to reach out to you if they want to learn more about what you do for lawyers?

 

Gretchen Cothron [00:20:54] They can reach out to me on my website. Gretchen Cothron Law dot com and you can also email me is the best way to get in contact with me. It’s Cothron Law at gmail.com and that’s c o t h r o n l a w at gmail.com.

 

Mike Whelan [00:21:11] Great. We’ll include all of that as well. We’ll want to see you guys next time. If you want to be a guest on the contract tear down show, just email us. We’re at Community at Law Insider dot com. We would love to have you to beat up a document. We will see you all next time, Gretchen. Thank you again. You have a good day.

 

Gretchen Cothron [00:21:28] Thank you so much, Mike.

Contributors

Mike Whelan
Mike Whelan
CEO @Lawyer Forward

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