COVID-19 Impact on Force Majeure Clauses In Contracts

by Lexus Sanders Njie

When two people form a contract, they typically have every intention on performing their contractual duties until both parties' expectations are met. In the beginning, the parties usually set out all of their expectations of one another in the contract, and among the clauses there is one that outlines when performance of contractual duties may be excusable. These types of clauses are called force majeure clauses.


Force Majeure clauses are placed in contracts to allocate the risk of either party not performing their contractual duties due to unforeseen or uncontrollable circumstances. In latin the term means “superior force” and the clause is designed to justify a party not performing their contractual obligations temporarily due the situations outside of their control and those that are not foreseeable. It is fundamental to remember that force majeure clauses are not loops to get out of a contract, they are typically only used to suspend performance.


COVID-19 impact on Force Majeure Clauses


During these unprecedented times many are concerned about their contractual obligations in light of COVID-19. Whether you are the person who needs someone to perform their contractual duties, or you are the person who wants to be excused from performance, you might naturally wonder if the coronavirus can excuse non-performance through a contract’s force majeure clause. In order to assess the issue of force majeure and COVID-19 there are several factors to consider. These factors include: the language of the contract, the event’s unforeseeability, and the causational link that leads to non-performance.


Language of Force Majeure Clauses is narrowly interpreted


First, when questioning the enforcement of force majeure clauses it is important to remember that they are governed by state law. Second, when courts are tasked with interpreting force majeure clauses, they will interpret the clauses narrowly and stay within the “four corners” of the contract, meaning that they will look only to the contract document itself and will not look to outside context. This narrow interpretation rule means that courts will look at the exact language of the contract when determining if the event that has led to non-performance is contractually covered. Therefore, keep in mind that the language of the contract will determine the outcome of enforceability.


Language in your contract that might trigger your force majeure clause in light of COVID-19 are: “government regulations or mandates” or ”national and global pandemics.” This type of language exemplifies the current situation we are living in with COVID-19. Currently, there are several regulations that restrict where people can go and what people can do. COVID-19 is a global pandemic and outbreak, that has caused much worrying and devastation to many people. Because COVID-19 could easily fall into either of those categories, it would be reasonable for the court to interpret the coronavirus coming under the umbrella of those two contractual phrases or similar language used in a contract.


Language that would likely not trigger the enforcement of a force majeure clause in light of COVID-19 are phrases such as “acts of god.” In contract history “acts of god” are usually seen as natural disasters and circumstances that pertain to Mother Nature.


Foreseeability


The key premise of force majeure clauses is to allocate risks of unforeseen or uncontrollable events. Therefore, if an event is reasonably foreseeable, it will likely not be an excuse for non-performance. A party claiming the event that would excuse performance, must show that the event was not foreseeable at the time of signing the contract. As a general rule, a risk that is or should have been foreseeable is one whose consequences will be allocated between the parties.


Causation


Lastly, if a party wants to enforce the force majeure clause, they have to prove the unforeseen event caused that party to not go through with their end of the bargain . As a rule, a party must prove that there is a direct link between the claimed event and the parties inability to perform. This means that in order for the coronavirus to excuse non-performance it must be directly linked to why a party cannot perform. This requirement is often called an impossibility requirement. Essentially, in order to meet this standard, COVID-19 must make performance of your end of the deal to be impossible at the moment. Lastly, included in the causation factor of force majeure, a party must prove that not performing was not at any fault of their own. This means the party asserting the defense could not have been negligent, careless, or made any intentional conduct that led to them not performing whatever act or services they had originally agreed to.


In conclusion, if COVID-19 is an event that could be covered in the language of describing force majeure circumstances in the contract and it is the direct cause of non-performance, it is likely that your force majeure clause is enforceable. If you find yourself questioning some of these essential factors then you should consult with a competent attorney on the possibility of force majeure enforcement in light of COVID-19.



About the Author

Lexus Sanders Njie is a current law clerk at Smith Dominguez, PLLC and a third-year law student at Campbell University Norman Adrian Wiggins School of Law. At Campbell, Lexus is involved in several pro-bono projects focusing on social justice and she currently serves on the board of the International Law Society. Lexus will graduate from Campbell in May 2021.