Courts Wrestle with Pandemic Delay Argument

In a decision, Rockwell at Amelia Passage, LLC v. Williams, et al., handed down just weeks ago, on June 29, 2022, by Florida’s First District Court of Appeal, the court considered whether the “force majeure” clause of a contract to sell a 154-acre parcel in north Florida excused the buyer’s failure to close on the purchase. Under the facts of the case, the court said the pandemic was no excuse for two primary reasons: (1) the parties knew of the ongoing pandemic when they negotiated a sixth addendum to the contract, but the addendum was silent about granting any pandemic-related extensions; and (2) in any case, the party’s failure to perform actually was unrelated to the pandemic.

The First District court was unpersuaded by the buyer’s attempt to argue that the “force majeure” clause of the contract – the general clause, what we lawyers call a “boilerplate provision,” providing an excuse to a party who fails to perform because of an “act of God” or an event out of the parties’ control. The “force majeure” clause at issue in Rockwell was broad enough to cover “any other cause not reasonably within the control of the [parties],” and the clause specifically called out certain discrete events as falling within the scope of the clause, including “hurricanes, earthquakes, floods, fire, unusual transportation delays, wars, [and] insurrections.”

The buyer argued that the pandemic fit squarely within the “force majeure” clause as a cause for delay beyond control of either party. But the First District zeroed in squarely on the fact that the pandemic had been a declared emergency for well more than a month at the time the parties inked their sixth addendum, yet the addendum was silent about the pandemic as a “force majeure” to excuse the buyer from certain due diligence activities that it was required by the contract to complete under an extended time schedule.

The Rockwell decision has practical impact on all contracting parties across Florida, but particularly stakeholders in the construction industry. Material costs have skyrocketed since the pandemic began, but most acutely in the last 18 months. Shortages of labor, already a significant challenge to contractors and suppliers before the pandemic, have been exacerbated by government mandates regulating vaccinations and other aspects of employment. These and other factors have meant project delays, escalated material and labor costs, and heartburn throughout the construction industry. And many construction contracts pre-date the pandemic or have standard “force majeure” clauses that do not squarely address these pandemic-caused or pandemic-related events.

The First District’s Rockwell decision provides a little glimmer into how courts are dealing and may continue to deal with reconciling real-world delays and cost escalations under standard “force majeure” clauses. The court makes clear in its opinion that “[a] force majeure clause can provide for contingencies broader than the common law contract doctrine of impossibility of performance.” (emphasis added). This language suggests quite clearly that the parties in Rockwell, by contracting in their sixth addendum, could have broadened the “force majeure” clause to include pandemic-related delays or extensions, and the courts likely would have enforced such a provision.

But the parties in Rockwell did not do so. Thus, the standard “force majeure” clause remained limited, says the court, and it was not an “opt-out” or get-out-of-jail-free card that could be played by parties on a discretionary basis. The court in Rockwell emphasized that a “force majeure” clause does not apply to matters within a party’s control, which is what the court held was the reason for the delay in that case: the buyer’s failure to conduct due diligence, despite those efforts being made more difficult by, among other things, the pandemic-related closures of government offices. And even still, the buyer in Rockwell failed to achieve or perform its due diligence on aspects of the sale where no pandemic-related events or closures were present.

The recent decision in Rockwell illuminates several key lessons for stakeholders in Florida’s construction industry:

I. If your contract pre-dates the pandemic, courts are open to an argument that a general “force majeure” clause may excuse a party’s performance, provided the delay or failure to perform truly was due to an event beyond the breaching party’s control.

II. If you negotiated a change order, addendum, or other written modification to your contract after the pandemic became a declared emergency, courts will examine the language of the change order, addendum, or modification to see if the parties themselves addressed extensions or alterations necessitated by the pandemic. And where the parties did not address the impacts of the pandemic in their change order, addendum, or modification, courts may not extend a general “force majeure” clause to cover pandemic-related events that were or may have been foreseeable to the parties.

III. Recognizing that contracting parties can provide for broader contingencies than standard “force majeure” clauses typically address, courts likely will enforce contract provisions that, for pandemic-specific reasons, excuse a party’s performance, provide for extensions of time, allow for price escalations, or otherwise address the impacts of the pandemic.

Our team of experienced attorneys can guide contractors and material suppliers through analyzing contract provisions and can assist in formulating new contract clauses to maximize time, cost, and performance flexibility for contractors and suppliers.