On March 23, 2020, Michigan Governor Gretchen Whitmer issued Executive Order 2020-21, the “Stay Home, Stay Safe Order”. In the Stay Home, Stay Safe Order, the Governor barred all in-person work in the state, unless it was “ necessary to sustain or protect life or to conduct minimum basic operations.” This restriction included most commercial and residential construction services (except for services related to road work, work on public health facilities and work for emergency repairs).
How does this impact owners, general contractors and sub-contractors on jobs in progress?
Of course, the express language of any contract will control, so the first place any party should look is their own agreement.
That said, most contracts between the owner of the property and the general contractor charged with building on, or renovating, the property contain a provision that requires the general contractor to follow all of the safety laws and regulations of the state in completing work on the project. The Stay Home, Stay Safe Order is a safety law or regulation and complying with it means keeping workers off the job while the order is in effect. Thus, it would likely not be a breach by the general contractor to stop working consistent with the Stay Home, Stay Safe Order. Further, even if there is no express contractual language requiring the contractor to comply with state safety laws, courts will not enforce a contractual term if performing that term requires an illegal act. Rose v. Nat’l Auction Grp., 466 Mich. 453, 469; 646 N.W.2d 455 (2002) (“it cannot be said that there was any breach of duty in defendants’ ‘failure’ to follow through . . . because there cannot be a legal duty to commit an illegal act.”). So, if the contract between the owner and the general contractor requires certain construction activities to be completed under a specific timeline, and that timeline has been altered by the restrictions contained in the Stay Home, Stay Safe Order, the contractor’s performance will likely be excused and not considered a breach.
The same principles apply for contracts between general contractors and their subs. Again, most such agreements contain express contractual language requiring the subs to complete work consistent with all state safety laws and regulations. Any agreement that does not have those protections will not be strictly enforced to require subcontractors to violate state law by having their employees perform work contrary to the Stay Home, Stay Safe Order.
Finally, delays in performance in a contract, whether caused by impossibility in the form of the Stay Home, Stay Safe Order, or other difficulty hindering timely performance (including failure to make timely payments by an owner or subcontractor) are not automatically considered breaches of a contract sufficient to allow a party to rescind or terminate the contract. See In re American Cas. Co., 851 F.2d 794, 800 (6th Cir. 1991) (Applying Michigan law finding that delay in payment by owner did not constitute impossibility excusing contractor from performing under construction agreement). While performance may be delayed by the interruptions caused by the Coronavirus, the delay is likely not a sufficient excuse for any party to rescind or cancel the contract. This means that the contractors and subs are still required to complete their services and the owner is still required to pay for services and materials under the contract, (likely subject to adjustments in timelines) despite the delays caused by the Coronavirus or the Stay Home, Stay Safe Order.