The coronavirus (COVID-19) outbreak has caused the widespread cancellation of high-profile live events, including Coachella, the Ultra Music Festival, NCAA March Madness, and NBA games. The CDC now recommends that organizers "cancel or postpone in-person events that consist of 50 people or more thoughout the United States." 1 In the absence of applicable insurance coverage, parties affected by the cancellation of events should consider whether the coronavirus outbreak constitutes a force majeure event or otherwise excuses nonperformance of contractual obligations.
A force majeure clause in a contract defines the scope of events that might excuse nonperformance by a party. These clauses are fairly common and may specifically list an "epidemic" (or something similar) as a triggering event. A-list performers are generally protected by broad force majeure clauses. Most force majeure clauses, however, do not attempt to specifically list every possible triggering event. Indeed, the purpose of a force majeure clause is to protect against the unexpected.
Even in the absence of a force majeure clause, courts may apply a common law doctrine of impracticability as a defense to performance under a contract impacted by coronavirus. For example, Florida law recognizes the doctrine of impracticability 2 as a defense when performance under a contract would involve "extreme and unreasonable difficulty, expense, injury, or loss." 3
Recent epidemics like Zika, Ebola, H1N1, and SARS did not result in the widespread cancellation of high-profile events. As a result, there is no clear legal precedent for how courts would apply force majeure clauses or the impracticability doctrine to the coronavirus outbreak. However, the existing case law suggests that nonperformance could be legally excused if the event poses a substantial health risk or will cause extreme and unreasonable expense.
For example, in Opera Co. of Boston v. Wolf Trap Foundation for the Performing Arts,iv an opera performance in a national park was canceled when a power outage endangered the safety of 6,500 ticket holders. The court recognized that the impracticability defense could be invoked because an unexpected (albeit foreseeable) event caused organizers to cancel a live performance that could have threatened public safety.
In contrast, in OWBR LLC v. Clear Channel Communications, Inc.,v an event organizer canceled a music industry conference scheduled in Maui five months after the September 11 terrorist attacks. The court noted that, although a terrorist attack is a force majeure event, "poor economic conditions, lower than expected attendance, or withdrawal of commitments from sponsors and participants" are not. The court held that "a force majeure clause does not excuse performance for economic inadvisability, even when the economic conditions are the product of a force majeure event." The court reasoned that there was "no specific terrorist threat to air travel to Maui" five months after September 11 and that to excuse "a party's performance under a force majeure clause ad infinitum when an act of terrorism affects the American populace would render contracts meaningless in the present age."
The takeaway from these cases is that "economic inadvisability," even if caused by the coronavirus, is unlikely to excuse contractual nonperformance. Rather, the key issue is whether the coronavirus outbreak threatens the health and safety of participants or causes "extreme and unreasonable" expense. Ultimately, this determination will turn on an evolving understanding of the coronavirus itself as well as facts specific to each event.
The coronavirus outbreak is a fluid situation that is likely to result in a number of threatened and actual lawsuits arising from canceled events. It is important for parties to contracts impacted by the coronavirus outbreak to:
- keep abreast of ongoing developments, particularly advisories from government agencies about hosting events;
- check applicable insurance policies to determine whether there may be coverage for any losses;
- review force majeure clauses in contracts to determine whether the coronavirus outbreak is a triggering event;
- assess the health risk of hosting an event;
- if an event is canceled, consider promptly providing notice of nonperformance to counterparties and taking steps to mitigate any harm resulting from cancelation;
- if an event will proceed, consider providing express disclaimers and warnings about the assumption of risk and/or obtaining releases from participants disclaiming liability for infections.
1 Center for Disease Control and Prevention, Get Your Mass Gatherings or Large Community Events Ready for Coronavirus Disease 2019 (March 15, 2020), https://www.cdc.gov/coronavirus/2019-ncov/community/large-events/mass-gatherings-ready-for-covid-19.html.
2 Florida Laundry Services, Inc. v. Sage Condo. Ass'n, Inc., 193 So. 3d 68 (Fla. 3d DCA 2016).
3 Restatement (Second) of Contracts § 261.
iv 817 F.2d 1094 (4th Cir. 1987).
v 266 F. Supp. 2d 1214 (D. Haw. 2003).
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