March 19, 2020
FORCE MAJEURE AND COVID-19
The coronavirus (COVID-19) pandemic has been devastating for people and businesses alike. As the global economy grinds to a halt, businesses are finding it difficult to fulfill contractual obligations for a myriad of reasons. Supply chain interruptions, labor shortages, and quarantines are just a few of the problems preventing companies from operating as usual.
If a business is suddenly unable to complete a contractual obligation – for example, delivery of products or services on time – because of an issue caused by COVID-19, does the business have any ability to prevent a breach of the agreement? Like most legal questions, it depends.
In many cases, if a business fails to perform under a contract, the contract may be considered breached. One potential exception is a well drafted force majeure clause. A force majeure clause relieves the parties of fulfilling the contract if an interceding act beyond the control of the parties occurs. Not all contracts contain these clauses. Further, these provisions may be drafted in a number of ways. Not every force majeure clause will relieve a party in the event of a pandemic like COVID-19. The force majeure clause should be carefully parsed to determine which specific events might permit non-performance.
What if the contract lacks a force majeure clause? In many jurisdictions, concepts of contractual impossibility or impracticability exist. These concepts are highly fact specific and may not apply in all cases.
If you would like to discuss how COVID-19 might impact your contract, please contact Jared Stark at firstname.lastname@example.org.