Can the Coronavirus Excuse Contract Obligations?
The coronavirus crisis has thrown business as usual out the window. As your clients struggle to cope with the many effects, from operational to economic, they may be wondering about the enforceability of some of their vendor contracts in light of this unprecedented event. Depending on the circumstances, it possible that contractual obligations might indeed be excused, or at least modified.
One potential defense to breach of contract claims is known as force majeure. “Force majeure clauses are designed to protect a party from being held liable for breaching a contract if it’s unable to perform due to an event that was unforeseeable at the time the contract was executed,” says Kayleigh Long, an attorney with Hirzel Law, a Michigan firm that focuses on condominium and real estate law.
Force majeure preempts liability for a breach of contract that’s due to causes beyond the party’s control, such as:
- Acts of God, government, or “the public enemy,”
- Natural disasters,
- Fire,
- Flood,
- Epidemics,
- Quarantine restrictions,
- Strikes,
- War or acts of terrorism, and
- Certain equipment breakages.
Typically, if a contract specifically identifies force majeure events, delays or failure in the performance of contract obligations are excused only if due to one of those enumerated events.
Force majeure also could apply by virtue of a state statute. California Civil Code Section 1511(2), for example, excuses performance when it’s “prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary.”
To learn more about force majeure and other potential defenses to breach of contract, read our new article, Vendor Contracts in a COVID-19 World.
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Matt Humphrey
President