Contract Fulfillment in Light of COVID-19

As is the case in many other aspects of business and daily life, the COVID-19 pandemic has caused a plethora of issues for parties seeking to enforce contracts and other written agreements.   A term you may hear discussed frequently by businesses and their counsel alike in this time is “Force Majeure.”   Force Majeure is a French word translating to “superior force,” and stands for the principle that an act of God, outside of the control of the contracting party, may act to excuse if it renders performance under a contract impossible.  This concept manifests in contract law where contracting parties include a clause in their contract that excludes or limits performance obligations when the same are caused by a “Force Majeure” event, and such a clause is commonly referred to as a Force Majeure Clause.  While American courts generally will not read the concept of Force Majeure into a contract that does not include a Force Majeure Clause, courts will enforce Force Majeure clauses in contracts when the court deems a qualifying event to have occurred.  Thus, in disputes regarding the Force Majeure clause, the question a court is asked to answer is often whether the circumstances rise to such a level that they are truly equivalent to an “Act of God” or other “superior force.”

Many commenting on the sweeping, unprecedented and widely unforeseen effects COVID-19 has had on business believe courts will likely find COVID-19 to be an event that triggers the concept of Force Majeure, where it is found to apply.  The specific wording of the force majeure provision in your contract will determine what type of relief and to what extent the performance may be excused.  Here, as with many other contractual interpretation issues, the devil is in the details.  A Court will ask: what specific events are included in the force majeure provision that would excuse performance?  Does the pandemic qualify?  Is the duty to perform discharged, or merely suspended?  If suspended, for how long?

Those whose contracts lack a force majeure clause (or who lack a written contract altogether) still need to consider the effects COVID-19 may have on their and their contractor’s respective performance obligations.  The common law doctrine of “frustration of purpose,” or “impracticability/impossibility” may afford parties to a contract, whether written or oral, a means through which to augment performance obligations.  Courts considering whether the doctrines of frustration of purpose,” or “impracticability/impossibility” apply, will consider whether the party seeking to reduce its obligations made reasonable efforts to overcome the source of the frustration, or that which makes the performance impracticable.  Further, the Court will seek to decide whether the event changes the contract terms so fundamentally from what the parties agreed on that it excuses the parties from obligation.  They will ask whether the duties and obligations under the contract are truly impossible to perform.

As is often the case, the legal analyses regarding force majeure provisions and the effects COVID-19 may have on parties’ contractual performance obligations is complex and fact-specific.  Each case is different, and every contract requires an in-depth review of the situation to determine whether and to what extent performance obligations may be excused.

Whatever your position in any contract, our attorneys here at Martson Law Offices can help you craft a plan to deal with any unexpected changes in your business dealings. Our attorneys are happy to assist with any of your needs related to your contracts – whether negotiation, review, drafting, or defense — and can arrange teleconferences to discuss this with you.  For more information, please contact us at (717) 601-2866.  We at Martson Law Offices wish you well, and hope you continue to stay safe during these challenging times.[author] [author_image timthumb=’on’][/author_image] [author_info]Written by H. Robert Fischer and David W. Park, Associates at Martson Law Offices[/author_info] [/author]

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