COVID-19 and Your Business: What Coronavirus Means for Performance of Contractual Obligations and Force Majeure Clauses
Businesses throughout the world have undoubtedly been disrupted in the last couple of weeks as a result of the COVID-19 pandemic, and in many cases, contract performance has been impractical or impossible. As a result, suddenly the “boiler plate” language of a force majeure clause in commercial contracts comes to life and exceedingly relevant to business both large as small. Importantly, businesses with commercial contracts need to understand whether force majeure provisions cover pandemics, and whether your business is excused from performance of certain contractual obligations.
Some force majeure clauses specifically include pandemics as triggering events, but not all. For contracts which specifically include this language, the World Health Organization’s declaration of a global pandemic on March 11, 2020 would certainly constitute as a triggering event to excuse or suspend performance under an agreement. You’ll need to review your clause carefully, however, as many force majeure clauses provide additional requirements regarding how long a pandemic event must last or require other conditions to occur before parties are excused from performance.
What about force majeure clauses that do not specifically list a pandemic, and rather includes a more standard terms such as an “Act of God” or “government action”? An Act of God has been defined as a natural disaster in a traditional sense like an earthquake, flood, or hurricane, or more broadly as an extraordinary force of nature that could not have been foreseen. Ultimately, whether or not the COVID-19 pandemic constitutes as an Act of God will likely depend on the jurisdiction where the contract is to be interpreted.
Where a force majeure clause includes a “government action,” parties may be more readily able to rely on the clause for suspended or excused contractual performance. This is especially true where government has shut down operations of certain businesses or industries, as we have seen in many parts of the United States, and especially in Colorado.
In each case, the specific contract language and underlying facts must be analyzed to make a determination as to whether or not parties are excused from contractual obligations. At SK&S Law Group LLP, our lawyers are prepared to quickly review and provide counsel regarding your pending contractual obligations in light of the COVID-19 pandemic. We are offering flat rate fees and expedited turn around for businesses with contractual obligations affected by the pandemic. Please give us a call today at 303-396-0270 or by email at christina@saunders-saunders.com to speak with an attorney about your force majeure clause and commercial contracts.