Non-Performance of a Contract – Is Covid-19 a Valid Excuse?

The Covid-19 pandemic has raised many legal issues arising from businesses failure to meet their contractual obligations. What many people often view as boilerplate language, that is rarely used, is now becoming the focus of virus-related lawsuits. The clause many business owners are relying on for failure to perform is known as the force majeure or “Acts of God” provision.

What is an “Act of God?”

Most contracts include a force majeure clause setting forth what constitutes an “Act of God” that justifies a party’s breach of the agreement. Natural disasters are what most people consider an act of God, but the force majeure clause typically includes other exceptions such as embargoes, civil disorder, strikes, war, declarations of a national emergency or an act of God that is beyond a party’s reasonable control.

Application of Contract Language

The court typically scrutinizes the contract language carefully before allowing a party’s nonperformance. Common factors considered by the court include:

● Whether the agreement lists events which are agreed by the parties to be justified excuses for nonperformance

● Whether the event causing nonperformance was unforeseeable

● Whether the event was the direct cause of the nonperformance (or whether it caused performance to simply be more difficult)

● Whether the event was serious enough that nonperformance was justifiable

Force Majeure and Covid-19

President Trump declared a state of emergency due to the nationwide health crises caused by the Covid-19 pandemic. Unlike many state of emergency declarations, the pandemic was a global concern impacting every country in the world. One could easily argue the virus’ impact across the globe was a reasonably unforeseen event. You will have to review your contract’s specific language to determine if it lists a pandemic or health crisis as an act of God. If it does, your argument is much stronger, but you must still show the impossibility of performance caused by the pandemic. Even if performance was technically possible, there may be an argument for impracticability of performance due to essential personnel being sick (not just quarantined, but incapacitated) causing the inability to complete the project.

If you need the advice and guidance of an experienced business attorney, contact our office today to schedule an appointment with one of our knowledgeable attorneys. We can help make sure you are protected under your legal documents and if a dispute arises, we will work diligently to obtain the best possible outcome in your case.