As Hurricane Helene makes landfall in the Southeastern United States, contractors will be halting work on projects throughout the region while awaiting the passage of the severe weather event. When the rain and wind subside, disputes may arise on construction projects due to the damage and after-effects that come with a severe weather event.
In the event a dispute does arise on a project following a severe weather event, the first place the parties should look to determine obligations is a contract’s Force Majeure Clause. Force Majeure Clauses typically allow a contractor to request a time extension due to the severe weather event. In some cases, the provision may even provide that the contractor may request additional funds to repair any work that must be repaired or replaced due to the severe weather event. Force Majeure Clause’s often contain notice requirements that mandate the contractor notify the project owner of the event and the additional time or funds that contractor will need to repair any damage. Project owners should require strict compliance with all Force Majeure provisions to ensure that contractors cannot obtain additional time extensions or funds where they have not fully complied with the contract.
If your contract does not contain a force majeure clause and there is a dispute, owners should direct contractors to submit a claim for additional time or money through the appropriate claim process. Without a force majeure clause, it may be prudent to execute a change order that sets forth the contractor’s time extension or the contractor’s entitlement to additional funds. Placing the agreement in writing reduces risk for both parties.
Another common dispute that may arise following a severe weather event is a severe increase in material prices. Again, the parties should look to the contract to determine whether there are caps on price increases for materials or if the contract explains who should bear the burden of a price increase caused by a severe weather event. If your contract does not cover material price increases, issuing a change directive or entering into a change order that caps material price increases for a certain period of time during and following the state of emergency will significantly decrease risk for project owners. If the contractor disagrees with the change directive, the contractor can make a claim through the appropriate dispute resolution process.
Many states have price-gouging statutes that prevent material suppliers and contractors from dramatically increasing prices during a state of emergency. For instance, in Georgia’s Fair Business Practices Act (O.C.G.A. § 10-1-390, et seq.) bars retailers from selling or offering at retail any goods or services identified by the Governor in the declaration of the state of emergency at a higher price than was offered immediately prior to the declaration of the state of emergency. See O.C.G.A. § 10-1-393.4. Florida Statute 501.610 similarly bars “unconscionable” price increases, which are price increases that “grossly exceed” the average price of a readily obtainable commodity thirty days prior to the declaration of a state of emergency. These statutes may be able to be used as a defense to significant price increases for materials following the declaration of a state of emergency.
