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Can a construction contract protect against the unpredictable?

On Behalf of | Jun 26, 2023 | Construction Law

In some ways, competent contractors and managers of construction can plan ahead for all kinds of theoretically unforeseeable issues. They can build a buffer into their projected timeline for rainstorms and supply chain interruptions. They can budget according to recent fluctuations in subcontractor rates.

However, there are always variables that businesses cannot predict and have no way of controlling that may ultimately undermine the success of large-scale construction projects. Is it possible for construction companies negotiating project contracts to protect themselves against future events that they cannot specifically predict?

Yes, there is a clause that can help in uncontrollable situations

The best contracts often include a combination of highly-specific details about the agreement between the parties and rules that are open to broad interpretation. A force majeure clause falls into the second category, as it provides broad protection from unpredictable circumstances that might interfere with the completion of the project.

Many construction companies and contractors will include a force majeure clause in any agreement that they sign with a client. After all, there are unknown variables outside of the business’s control that could prevent the timely completion of the product. There could be a volcano eruption that affects shipping and makes certain types of structural steel unavailable for months. There could be a terrorist attack that has an impact on local infrastructure.

A force majeure clause protects the parties subject to a contract by allowing them to breach the contract in unusual circumstances beyond their control that prevent them from fulfilling their commitments. There will need to be evidence of uncontrollable extenuating circumstances and a good-faith attempt to follow through when possible, in most cases, if a business invokes a force majeure clause in response to a client lawsuit.

It is rare for situations to become so extreme that a company can’t continue operating, but it does happen. Although force majeure clauses rarely come into play, they are a key form of protection when unusual and potentially catastrophic factors affect the success of a construction project. Carefully customizing each construction contract when bidding on projects can be of the utmost importance for the protection of businesses that helps to develop, erect, repair or renovate houses and other structures.