Several computer applications vital to the construction industry appear to have been affected by the faulty CrowdStrike update that triggered a global outage of many Microsoft-enabled systems. According to Trimble, affected construction-related applications include:

1. Accubid Anywhere, Contract Master, Conect2Fab, Estimation MEP, Fabshop, LiveCount, MEP Content, ProDesign, Supplier Exchange, SysQue, Trade Service, vPricer, WinEst
2. Viewpoint for Projects, FieldView, JobPac, Viewpoint Team, HR Management, Financial Controls, Field Management, Field Service, Traqspera, Service Tech, Spectrum, Vista, e-Builder.

Time lost means money lost for building contractors, who are often held liable by contract for delay in completion beyond a set date. The CrowdStrike outage began on July 19 and has likely caused significant delays in numerous building projects. Will contractors have any recourse? Below, we consider the extent to which force majeure clauses, which absolve a party from liability for inability to fulfill a contract due to forces beyond its control, may provide relief in some cases.

Financial responsibility for delay

A standard AIA A101 contract, a form regularly used for construction projects, provides liquidated damages as follows “§ 3.4.2  The Contractor shall be liable for and shall pay to the Owner the sum of {TBD} Dollars (${TBD}) per day as fixed, agreed, and liquidated damages for each calendar day of delay occasioned to Work performed under this Agreement beyond the dates for Substantial Completion, until the Work is substantially complete.” The parties will agree on a dollar amount wherein a contractor will have to pay an owner for every day the project is delayed.

Force Majeure clauses

The applicability of a force majeure provision depends on the specific contract, and invoking such a clause requires meeting a high threshold. The standard AIA A201 form provides the following Force Majeure Clause:

• § 8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by (1) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor; (2) by changes ordered in the Work; (3) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, or other causes beyond the Contractor’s control; (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) by other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.

In New York as in most states, force majeure is interpreted narrowly. In Kel Kim Corp. v. Cent. Mkts., Inc. (3d Dept. 1987), a New York appeals court held that force majeure defense is narrow and excuses nonperformance “only if the force majeure clause specifically includes the event that actually prevents a party’s performance.” Events not specifically listed in a force majeure clause may still trigger the clause if the clause is expansive in scope or includes a broad catch-all provision. See, e.g., Constellation Energy Servs. (1st Dep’t. 2017). However, like section 8.3 of the AIA 201, if the clause provides a specific list of events and includes a broad catch-all, the clause applies only to events of the same general kind or class as those specifically listed. See, e.g., Team Mktg. USA Corp. v. Power Pact, LLC (3d Dept. 2007), in which the appeals court held that the phrase “for any reason” did not encompass events outside the general kind or class of those specifically listed, such as “strikes, boycotts, war, Acts of God, labor troubles, riots, and restraints of public authority.”

While there are beneficial arguments that the CrowdStrike outage qualifies as a force majeure event pursuant to the plain language of the template 8.3 provision, the case history is a good reminder to reevaluate the language that contractors and owners utilize when drafting or modifying construction contracts.

In some cases, a force majeure clause may offer limited relief, entitling the contractor only to a time extension. This would prevent an owner from declaring a contract default or assessing liquidated damages, but it would not provide any compensation for the contractor’s additional costs due to the global cyber outage caused by CrowdStrike, providing the contractor only with extended performance duration. It is anticipated that the CrowdStrike outage will provide fodder for litigation if the force majeure clauses are ambiguous with respect to their application to the outage. Contractors will be seeking time allowances for any delays because of the CrowdStrike outage.

Given recent large-scale disruptions to commerce, including accidents triggering supply chain issues (e.g., the Evergreen Suez Canal blockage, and the Francis Scott Key Bridge Collapse), the worldwide Covid-19 pandemic and resulting supply chain disruptions, the intensification of natural disasters (Hurricanes Ian, Maria, Irma and Harvey and the April 5, 2024 earthquake in New York), and the recent CrowdStrike system defect, it is an appropriate time to revisit template construction contracts, to ensure the force majeure clause is drafted broadly to capture as many potential triggering causes as possible.

Because the force majeure clause in the template AIA contract specifically references only “labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions,” general contractors and subcontractors are well advised to expand such clauses to incorporate more triggering events, including cyber disruptions. This will provide greater protection if another “once in a lifetime event” occurs.

Owners may be reluctant to accept a broader force majeure clause, because delays usually have a negative effect on their bottom line and may even cause financial hardship stemming from mortgages and loans obtained for the construction phase. But that is what negotiation is for – to balance such risks between parties.

Owners and Contractors should consult with experienced construction lawyers who can review their contracts and suggest improvements to address the concerns raised by the CrowdStrike outage and other recent “once in a lifetime events,” which seem to be occurring more frequently than ever before.