Does Coronavirus Excuse Contract Performance?
Updated: Apr 17, 2020
The answer depends on the force majeure clause in the contract – if it has one.
If it does, start with its language. It may contain a list of specific events that are a force majeure. It may just say anything out of the parties’ control. It may define specific events and then have broad catch-all language.
The more specific the clause, the more limited application it has unless the actual occurrence is on the list of specific events. Most clauses say they are only invoked when performance is impossible; some have more liberal language requiring only the hindrance or delay of performance.
Any broad force majeure clause language should apply since March 11 when the World Health Organization declared it a pandemic. It is unlikely any court would decide that any private party caused the coronavirus. Many clauses specifically include “epidemic” or “pandemic” in the list of qualifying events. Even without a specific reference, the coronavirus should qualify under most force majeure clauses due to government-imposed travel bans and quarantines.
Most courts require the party claiming force majeure to show the event was not foreseeable and directly caused the failure to meet its contractual obligations. A pandemic resulting in mass closures of all public events and schools should not be a close call. This is not a normal risk of doing business. The law does require the mitigation of damages, and many businesses can continue to operate at some, if not full, capacity.
As in any contract matter, strict compliance with contract technical requirements may be necessary to invoke the clause. Typically, a contract requires prompt notice of a claim of force majeure. Several courts have refused parties’ force majeure claims when they failed to provide adequate notice under the contract.