The COVID-19 pandemic and other parallel factors have caused commodity prices to decline, supply chains to break, and governments to restrict international trade. These unprecedented times have led many to ask themselves, “How can I get out of an unfavorable (or even impossible) contract?”
Force majeure clauses allow a party to suspend performance and/or avoid liability for non-performance if unforeseen circumstances make performance impractical or impossible. While some countries statutorily provide for force majeure, in most common law jurisdictions it is a contractual remedy. (This unfortunately means that its validity, application, and resolution must be analyzed case-by-case.)
I often work with Texas and New York law. When the concept is not expressly included, neither of these states apply a “common law doctrine” to include it. (You could, however, try to rely on affirmative defenses like “impossibility of performance” or “frustration of purpose.”)
If expressly included, courts resolving contractual disputes analyze both the intent of the signing parties and the specifics of the language. For this reason, precise language is important.
In the current environment, precision is more crucial than ever. Specifically, many clients need help understanding whether declared “pandemics” like COVID-19 would trigger force majeure. Standard language to date often does not expressly include “pandemics,” so the analysis revolves around a “catch-all” phrase such as “an act of God,” or “an act of government authority.”
Well, I don't think we're ready to claim that a government act imposed the Coronavirus on us. In the same vein, Texas law considers something “an act of God” only if it is beyond the scope of human intervention. Whether or not the COVID-19 pandemic qualifies as an “act of God” is certainly debatable (if only because lawyers can debate anything).
Originally published 05 June 2020
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