Force Majeure Under Contract Law and COVID-19

One of our favorite movies in recent times is Force Majeure, a funny and precisely observed psychodrama that tells the story of a family and what happens when disaster strikes and family duties aren’t upheld.

Any person or business anticipating its own — or a counterparty’s — inability to comply with contractal obligations due to COVID-19 should understand this clause in their contracts – force majeure.

1. What is Force Majeure?
   A force majeure is an unanticipated event beyond the control of the contracting parties that makes it impracticable or impossible for a party to fulfill its responsibilities and obligations.
2. Why Should You Care?
   Because a force majeure clause may excuse a party from performing under a contract. When a force majeure event occurs, the parties to the contract are not in breach of contract for not following their contractual duties. Businesses should look for and assess force majeure provisions in any contracts, especially if they anticipate that they or their counterparty will not fulfill their duties as a result of the outfall from COVID-19. Without a force majeure clause, you could be in breach of contract for not showing up for a consulting gig during a pandemic!
3. What You Should Look For?
   Those provisions typically require the event to be unforeseeable to both parties, and sometimes specify certain types of events that are automatically unforeseeable, such as, for example, earthquakes, acts of terrorism and sometimes epidemics or pandemics.
4. What if There is No Force Majeure Clause?
   Even without a force majeure clause, performance under a contract may still be discharged if a party cannot meet its obligations due to COVID-19. Generally, a party has no duty to perform under a contract if performance becomes impossible or in some jurisdictions impracticable. “Impossible” and “impractical” are legal standards. Courts may conclude that performance is impracticable when it can only be accomplished at an excessive, unreasonable, and non-negotiated cost or impossible when a party cannot perform due to circumstances beyond that party’s control.