Businesses are facing a major crisis in the wake of the Coronavirus—especially those import ventures who draw their stock from afflicted countries.
Supply chain disruptions will bear a negative impact upon business survival, with many closing if predictions prove true and the virus continues to spread.
Already product imported from other countries is starting to diminish, which threatens the viability of building projects in particular.
The effect probably will strike sub-contractors first as the supply of available manufactured product diminishes. If sub-contractors are not able to attain and install building materials, then they will be unable to do their jobs. Upline, if head contractors can’t build installed product, then they too will be unable to fulfill their contractual requirements.
If these professionals can’t fulfill their obligations, then building projects will meet with timely suspensions. Cash flows will be disrupted as milestones will not be achieved, while holding costs will still be incurred. In the view of many, this means that the contractor will take the fall.
The most carefully considered contracts are based on variables likely to occur throughout the course of any given project. No one expected Coronavirus. No one figured a pandemic into their plans.
When faced with a disrupted supply chain, first review the building contract and its variation or time extension provisions. Ask a construction lawyer and see if contractual obligations exist. A failure to do so could leave you exposed to liquidated damages or the risk of contractual repudiation for non-contractual performance.
If these stipulations are not found, then ask the lawyer about the possibility of negotiating contractual variations necessitated by the impacts of serious unforeseen problems. Be sure to look for Force majeure clauses, which cover ‘acts of God’ or unpredictable circumstances.
Contract frustration happens when a contract is closed due to an unexpected occurrence like war or illness renders the needed work specified in the contract impossible to perform. The ability of a virus to freeze supply chains could cause contractual frustration; again, ask your lawyer for guidance.
Ignoring the problem won’t make it go away. Those who adjust, implement and be open to change will fare best.
These days, people tend to blame one another instead of working together. This attitude will not hold in the time of COVID-19.
To put it simply, sub-contractors and installers unable to access supplies will be unable to install them and complete their contracts. The developer will be unable to complete and sell the job overall. This is nobody’s fault, but everybody’s problem.
At this point, conversation, compromise and negotiation are the order of the day. Talk it out, write it out in the form of a contract—literally and figuratively, work it out.