Force majeure is an event or effect that can neither be anticipated nor controlled, such as hurricanes and tornados which are considered to be “acts of God,” and other events like war, government regulations and epidemics. Thus, COVID-19 may be a force majeure event depending on the language of your contract
Force majeure clauses are most prevalent in commercial contracts including leases, real estate purchase agreements, construction contracts, and supply agreements. The actual language of the force majeure clause is what will determine whether you, or the other party to your contract, will be excused for partial or non-performance of contractual obligations. Oftentimes, force majeure clauses will contemplate government orders or regulations, pandemics or epidemics, and the clauses may even contain vague language intended to be a catchall for unanticipated circumstances.
COVID-19 has caused incredible disruption to businesses making it difficult for one or both parties to fulfill their obligations on time. Force majeure clauses operate as somewhat of an insurance policy, to relieve one or both parties to a contract of some or all of their obligations, such as rent payments, closing on real property, fulfilling orders, or completing construction projects. You should also review your actual insurance policies, including business interruption policies and any attached riders; these policies may cover lost revenue and other fixed expenses such as rent and utilities.
Force majeure, of course, cuts both ways. You may find yourself on the receiving end of a party relying on force majeure to excuse their non-performance. If this is the case, it is imperative that you review and follow your contract’s notice provisions and scrupulously comply with the contract in order to reserve your rights and to avoid later claims that you or your business waived those rights.
Should a contract omit a force majeure clause, there are other legal concepts, such as the doctrine of “frustration of purpose” and “impossibility of performance,” which may help mitigate performance. In fact, the mandated governmental shut down, in itself, may constitute a basis for at least a temporary reprieve from performance.
If you would like Blalock Walters to review your force majeure clauses or agreements in order to best position yourself in the current environment please call our office at 941.748.0100 or email business and corporate attorney Jodi Ruberg at firstname.lastname@example.org. We are open and responding to clients on a continued basis as we help them navigate this most challenging storm.