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Force Majeure and COVID-19

Force Majeure and COVID-19The COVID-19 pandemic is bringing new relevance to an old contractual principal, “Force Majeure.” This clause discharges certain contractual obligations upon the occurrence of a force majeure event.  What obligations are discharged and under what circumstances depend on the language of the specific force majeure clause.

These clauses are often included in contracts but historically have had little application. That, however, is likely to change given the current economic climate in light of COVID-19.

 

What is Force Majeure?

A force majeure event is an occurrence that prevents a party from performing under a contract and that either could not have been foreseen, or could not have been prevented even with diligence and care. These events often include acts of god like tornadoes and hurricanes. However, it is not limited to natural disasters. It can also include man-made events such as labor strikes, war, and actions of government.

 

When is Force Majeure Applicable?

There is a very high standard for meeting the requirements of force majeure. Courts have ruled that events which only make performance more difficult, or less profitable do not rise to the level required to trigger a force majeure clause. For force majeure to be applicable, the triggering event must make compliance with contractual obligations impossible.  Further, the impossibility of performance must be due to an unforeseeable or unpreventable force majeure event, and not due to a party’s own negligence.

Even acts of god often do not rise to the level of force majeure. Where force majeure is based on a weather occurrence, the occurrence must have been unforeseeable and must make performance impossible. Things like heavy rain storms likely will not constitute force majeure even if they frustrate the purpose of a contract where it is still possible to complete performance.

 

Look to the Language of the Force Majeure Clause

Not all force majeure clauses are created equal. While some force majeure clauses may excuse performance entirely, others will only discharge certain specified contractual obligations. Additionally, whether a certain event constitutes a force majeure event depends on the language of the force majeure clause. Often a limited number of events will be listed, and other unspecified events may not trigger the force majeure clause even if they render performance impossible.

 

Force Majeure in the COVID-19 Era

The present global pandemic has created an environment where force majeure clauses will be of much more importance than they historically have. Where COVID-19 has made performance of contractual obligations impossible, force majeure clauses may provide a defense in contract disputes.

Force majeure clauses’ resurgence in today’s society is not only due to the direct effects of COVID-19, but also because of the actions that are being taken to combat it. “Stay at home” orders have been issued in California and numerous other states. Contract performance that necessarily requires violating stay at home orders could give rise to force majeure issues.

If you are involved in a contract dispute, it is smart to speak with a top-rated SoCal business attorney.  In many cases, these disputes can be settled harmoniously without litigation. If litigation is your only option, our Irvine based team of experienced business litigation attorneys and trial specialists are here to help.

Contact Brown & Charbonneau, LLP today by calling 714-505-3000 to schedule your appointment.