LEGAL
every circumstance and contract. Each case will turn on its facts and
the specific language of the governing.
For instance, clause 6.5.3 of the CCDC 2 stipulated price contract
does not refer to the word “pandemic” as a triggering event.
However, subclause 6.5.3.4 provides relief where performance
has been delayed by “any cause beyond the contractor’s control.”
Arguably, the COVID-19 pandemic could create such an event.
For example, if governments were to issue public health orders
preventing construction projects from continuing, it may delay
performance or make performance impossible and qualify as a triggering
event to relieve a party from its contractual obligations.
Currently, construction is still an essential service in Manitoba.
However, delays may still be caused by material shortages, staffing
issues or other consequences of the pandemic. As a result, construction
companies may be looking at these types of clauses to try
and excuse or delay performance.
Also consider clause 7.2.2 of the CCDC 2, which gives a contractor
the right to terminate a contract in the event of an order of
a court or other public authority that suspends or otherwise delays
work for a period of 20 working days or more. In the event of a stop
work order from a public health authority relating to COVID-19,
one may consider relying on this clause to terminate as opposed to
simply seeking an extension under clause 6.5.3.
There may be applicable notice provisions that apply before a
force majeure type clause can be relied upon. For instance, in the
CCDC 2 stipulated price contract, no extension under clause 6.5.3
can be provided unless the notice provision under clause 6.5.4 is
complied with:
6.5.4: No extension shall be made for delay unless
notice in writing of the cause of delay is given to the consultant
no less than 10 working days after the commencement
of the delay. In the case of a continuing cause of delay only
one notice of delay in writing shall be necessary.
Termination under clause 7.2.2 also requires that notice
be provided.
If notice is provided under a CCDC 2 stipulated price contract,
the party relying on the event may not be excused from performance
completely, but only entitled to an extension of time. In such
a case, the party must mitigate the impact of the event as much as
possible given the extension is only for as long as the event causing
the delay. The expectation will be that the work resumes as soon
as possible.
Notwithstanding the above, not all construction contracts are
in the standard form and contain force majeure clauses. So is there
any relief for a contracting party where performance becomes
impossible, but the contract does not contain a force majeure
clause? Without a force majeure clause, parties to a contract may be
able to rely on the common-law doctrine of frustration in situations
outside of their control that render them unable to fulfill their
obligations under a contract.
Frustration occurs when a situation has arisen for which the
parties made no provision in the contract and performance of the
contract becomes “a thing radically different from that which was
undertaken by the contract.” Frustration operates much the same as
a force majeure clause. However, a major difference is that an intention
to resume a contract at a later time may defeat the ability to rely
on the doctrine. Therefore, if the intention is to resume the contract
at a later date, the doctrine of frustration may not provide assistance.
In considering whether the COVID-19 pandemic has created
a force majeure, the specific facts and wording of the contract are
paramount. Not all force majeure clauses enable parties to terminate
a contract, but instead allow for a suspension of work until the
occurrence causing the delay is over. Further, it is imperative that
parties seeking to rely on force majeure clauses satisfy any notice
requirements and mitigate the impact of the event. n
Aaron Challis is a lawyer at Fillmore Riley LLP who practises primarily
in the area of civil litigation, with a focus on a wide range of
insurance matters, commercial litigation and insolvency. Contact him at
204-957-8340 or achallis@fillmoreriley.com.
KATERYNA KON/123RF
CENTAUR PRODUCTS INC.
Canada’s Proud Supplier of:
Sports Flooring Daktronics Scoreboards
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Toll Free: 1-888-430-3300 Phone: 204-832-6288 Email: tammyc@centaurproducts.com www.centaurproducts.com
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