Early in the COVID-19 pandemic, we wrote about the legal concept of “force majeure” clauses found in some business contracts. A force majeure clause excuses a party from performing its obligations under a contract based upon some unforeseen and serious event such as a war, riot, insurrection, natural disaster, or other act of God. At that time, we suggested that over the course of the pandemic, more and more courts would be asked to relieve a party from having to honor its contractual obligations because the pandemic made it impossible or extremely impractical to uphold its end of a deal.
As predicted, many courts have now applied traditional force majeure clauses to the novel coronavirus pandemic and the following trend is starting to appear: in certain cases, courts have expressed a willingness to excuse parties from performing their agreements due to the pandemic if the parties’ contracts contain the right language. For example, if the force majeure clause specifically excuses performance due to a “pandemic,” then the analysis is straightforward and simple. If the pandemic did, in fact, prevent a party from delivering goods or fulfilling its obligations, then that party will be excused from performing. But, unsurprisingly, very few contracts written over the last several years will contain the term “pandemic” as a reason to excuse performance.
Therefore, parties have been seeking to use their existing contract language to argue that the COVID-19 pandemic fits within the scope of that language. In a very interesting case decided last month in New York federal court, a party successfully argued that the pandemic constitutes a “natural disaster,” such that it should have been excused from having to perform. The federal court agreed, noting that “it cannot be seriously disputed that the COVID-19 pandemic is a natural disaster.” This ruling is remarkable because when the attorneys who wrote the contract at issue typed “natural disaster” in that contract, they were most likely thinking of things like typhoons, earthquakes, and hurricanes, not a pandemic.
This decision underscores the importance of checking your contracts carefully and consulting with competent legal counsel who can pursue novel and creative arguments using the existing language in your contracts, even if you or your attorney had not anticipated the outbreak of a worldwide pandemic. It’s possible there is language in your contracts that can nonetheless help you. If you have questions or would like further information, please contact PLDO Partner Brian J. Lamoureux at 401-824-5155 or email firstname.lastname@example.org.
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