Supply chain disruptions have become a common issue in the construction industry. When a contractor cannot fulfill a contract because materials are delayed or unavailable, it raises important legal questions.
Understanding the remedies available can help parties navigate these challenging situations.
Understanding breach of contract
A breach of contract happens when one party fails to meet their obligations as agreed. In construction, this might occur if a contractor does not complete work on time or to the required standards. Supply chain problems can lead to delays or incomplete projects, which may constitute a breach.
Force majeure clauses
Many construction contracts include force majeure clauses. These clauses excuse parties from liability if unforeseen events beyond their control prevent them from fulfilling the contract. Supply chain disruptions caused by events like natural disasters or pandemics may activate this clause. However, the specific language of the contract determines whether it applies.
Legal remedies for the non-breaching party
When a contractor breaches the contract, the other party has several legal remedies.
- Termination of the contract: The owner may choose to terminate the contract. This allows them to hire another contractor to complete the work. The original contractor may be liable for any additional costs incurred.
- Damages: The non-breaching party can seek damages to compensate for losses. This might include the cost difference between the original contract and a new contractor, as well as any other expenses caused by the delay.
- Specific performance: In some cases, the court may order the contractor to fulfill their obligations. This remedy is less common in construction contracts because it may not be practical.
Mitigating damages
The non-breaching party has a duty to mitigate damages. This means they should take reasonable steps to reduce their losses, such as finding alternative suppliers or adjusting project timelines.
Supply chain disruptions pose significant challenges in construction projects. Knowing the legal remedies available when a contractor breaches a contract helps parties protect their interests. Clear contract terms and open communication can prevent disputes and lead to better outcomes.
