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Why Contractors Should be Wary of an “Act of God” Defense During the Coronavirus Pandemic

Edward Farrell Cummins & White

Edward Farrell

Often one of the most overlooked clauses in construction contracts is getting a lot of attention these days during the coronavirus pandemic. The clause, commonly entitled “Force Majeure” or “Act of God”, provides an excuse for the performance of a contractual obligation when it is “prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary…” (Cal. Civ. Code § 1511(2).)  Even when such a clause is not explicitly included in a construction contract, the Civil Code statute provides relief to a contractor when performance is impossible or impractical to perform under the circumstances.

This article provides insight into areas where the Civil Code statute has been successfully applied in the construction context. It will also discuss whether COVID-19, and the associated government shutdowns aimed at controlling the virus, allow contractors to successfully invoke the statue in their own defense.

Civil Code § 1511(2) has a very narrow application. “Irresistible, superhuman cause” under the statute is equivalent in meaning to Act of God and refers to natural causes whose effects cannot be prevented by exercise of prudence and care. (Ryan v. Rogers (1892) 96 Cal. 349, 353, 31 P. 244.) Qualified natural causes or obstacles under the statute are those that render performance practically impossible or impracticable. (City of Vernon v. City of Los Angeles (1955) 45 Cal.2d 710, 719–720, 290 P.2d 841.) Importantly, the fact that performance is not economical for the contractor to perform does not excuse performance. Instead, the cause for the excuse must show that the contractual work could not be done by anyone under the existing circumstances.

In the construction context, circumstances that interfere with the prosecution of the work and make it more difficult or time consuming do not excuse either party from performing, unless impossibility can be shown. For instance, the defense was upheld where a contractor agreed to erect a building according to specifications and was then prevented by a city ordinance from erecting the building specified or any building that would be adequate for the purposes of the contract. (Collins Hotel Co. v. Collins (1906) 4 Cal.App. 379.) On the other hand, the defense did not succeed where a city ordinance created an eleven-month delay in the construction of a building which substantially increased the burden on defendant contractors. (G.W. Anderson Construction Co. v. Mars Sales (1985) 164 Cal.App.3d 326.)

The impossibility defense under Civil Code § 1511(s) has applicability today. The coronavirus pandemic is clearly an extraordinary, Act of God event that is having a profound and widespread impact around the world. The construction industry is particularly impacted because the common social distance and work from home measures adopted to prevent the virus spread are often unrealistic. That requires an analysis as to whether continued performance on a work of improvement is viable at all while the virus spreads. Such a determination depends on the contractor’s particular role or services provided to a project.  For most contractors, unless they or their crews actually have COVID-19, it is not practically impossible for them to work. It just makes continuing a construction job more risky, expensive or burdensome. The courts will not grant contractors relief under the impossibility doctrine for discontinuing work under these circumstances.

Government measures issued to “bend the curve” of the COVID-19 infection rate may also not meet the impossibility threshold. On March 19, 2020, California instituted a statewide stay at home order for all residents except as needed to maintain continuity of operations of critical infrastructure sectors. After the order was issued, Governor Newsom’s office confirmed that the essential workforce excluded from the order included those in the industrial, commercial, residential, and sheltering facilities and services. That workforce was broadly defined as including,

“Construction Workers who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing, commercial, and mixed-use construction); and workers who support the supply chain of building materials from production through application/installation, including cabinetry, fixtures, doors, cement, hardware, plumbing, electrical, heating/cooling, refrigeration, appliances, paint/coatings, and employees who provide services that enable repair materials and equipment for essential functions.”

Based on this wide-ranging definition, contractors, design professionals, laborers, and material men are exempt from the stay at home order and can continue operations on any work of improvement. The Governor’s carve out for the construction industry weakens the argument that the government’s response to COVID-19 has made performance impossible. That may be unfortunate news for some contractors, but the heightened burden to prove impossibility reflects the laws preference that the contractor assume the risk that the improvements can be built for the contract price. Overcoming that preference is a formidable effort. Absent contract language to the contrary, it is unlikely that the coronavirus pandemic will suffice as the “irresistible, superhuman cause” to allow the construction industry to excuse timely performance under Civil Code § 1511(2).

A contractor who is unsure whether its contract affords protections under Civil Code § 1511 or whether the current pandemic provides cause for an impossibility defense to performance should seek legal counsel. Here at Cummins & White, LLP, we specialize in counseling and representing contractors, subcontractors and materials suppliers on both private and public works of improvement. As such, we routinely advise construction clients on their contractual rights and how to best preserve them.