The Corona Virus Pandemic (“Pandemic”) has dashed the global economy sending shockwaves through virtually every industry; New York has now become the epicenter of the Pandemic, not just in the United States, but possibly the World. In order to combat the Pandemic, Governor Cuomo issued Executive Order 202 on March 7th, 2020, declaring a State of Emergency in New York. Not only did this unlock funding to combat the Pandemic, but this also provided Governor Cuomo with broad ranging authority to “issue any directive during a disaster emergency to cope with the disaster” (Executive Law; Article 2-B (Section 29-a)), this includes the authority to heavily regulate both public and private business in New York.
In situations such as this, providing proper notice of delays/impacts and requests for extension of time under the respective contract is very important. However, what is commonly known as a “force majeure” clause will also be at issue. Force majeure (“superior force” in French), is a contract provision that relieves the parties from performing their respective contractual obligations when certain circumstances beyond their control arise, such as the Pandemic, make performance inadvisable, commercially impracticable, illegal, or impossible.
The purpose of this Legal Alert is to highlight the importance of proper notice, whether that be in a private or public context.
The Importance of Proper Notice: Private v. Public Contracts
Virtually every construction contract contains notice provisions that should be adhered to by the contractor in the event of a delay/impact, request for an extension of time or invocation of force majeure; if available, however, depending on whether the contract is private or public, there is an enormous difference between the way these notice provisions are construed by New York Courts. Many of these distinctions, which are dictated by public policy, are discussed in further detail in Huff Enterprises, Inc. v. Triborough Bridge & Tunnel Auth., 191 A.D.2d 314, 316–17, 595 N.Y.S.2d 178 (1st Dep’t 1993).
In a private context, the contractor should put the owner or upstream contractor on notice of delays/impacts, requests for an extension of time or invocation of force majeure pursuant to the terms and conditions of the contract; however, under Barsotti's, Inc. v. Consol. Edison Co. of New York, 254 A.D.2d 211, 212, 680 N.Y.S.2d 88 (1st Dept 1998), among other authority, the general course of conduct between the parties can modify the terms and conditions of the private contract. So, as is incredibly common, if not thestatus quo, modern construction administration is generally performed via email. Depending on the facts and circumstances, emailing notice should be enough to preserve the contractor’s entitlement to an extension of time, claims for delay/impact costs or invocation of force majeure, if applicable.
Under the landmark New York Court of Appeals Decision in A.H.A. Gen. Const., Inc. v. New York City Hous. Auth., 92 N.Y.2d 20, 31, 699 N.E.2d 368, 374 (1998), providing notice in strict conformance with the terms and conditions of the respective public works contract is a condition precedent to recovery. Generally, a condition precedent is an act or event which must occur before a duty to perform a promise in the agreement even arises. So, a public entity’s promise to give the contractor an extension of time, additional funding for delays/impacts or not to assess liquidated damages due to unforeseen circumstances (i.e. the Pandemic), does not even come into fruition unless the contractor stringently conforms to the respective notice provision in the public works contract.
In essence, if a contractor does not strictly conform to the public contract’s notice provisions, to the letter, the contractor risks forfeiting its entitlement to an extension of time, delay/impact damages and even invocation of force majeure. Even worse, if the contractor is not issued an extension of time for failure to strictly comply with notice provisions, liquidated damages can be assessed for the contractor’s failure to deliver the public works project on time.
Disaster can shape a generation; the Pandemic is unique in that it has impacted the entire World and New York appears to be hit the hardest so far. It is absolutely essential for contractors to provide proper notice. Reliable legal advice from experienced construction litigators can help contractors avoid these potential pitfalls and exposure to liability stemming from the Pandemic. As always, Welby, Brady & Greenblatt, LLP remains available to answer questions you may have as the legal landscape evolves during this Pandemic.