Force Majeure and COVID-19
A force majeure provision relieves a party
from its obligation to perform under a contract when circumstances beyond the
party’s control have rendered performance impossible or impracticable.
The global economic impact of the coronavirus
(COVID-19) is being felt locally, and nearly all businesses have been forced
to make significant adjustments to their operations to avoid shutting down
As businesses make those adjustments, many
are left wondering how, if at all, they will be able to keep up with their
existing contractual obligations. That analysis will likely involve a
careful review of a provision common to most contracts referred to as
force majeure. Generally, a force majeure provision relieves a party from
its obligation to perform under a contract when circumstances beyond the
party’s control have rendered performance physically and/or economically
impossible or impracticable.
Until recently, force
majeure provisions were overlooked as standard “boilerplate” contract
language. That is largely because a party seeking relief under a force
majeure provision must be able to demonstrate extraordinary circumstances
preventing them from complying with a contract. Typical examples of force
majeure events include extreme weather, terrorism, war, riots, government
regulation/legislation, lockouts, strikes, etc.
With the outbreak of the
COVID-19 pandemic, force majeure provisions are returning to the forefront
of contract law and are particularly relevant in landlord-tenant and
The applicability of force
majeure clauses to COVID-19 will vary depending upon the language of the
specific clause. For example, certain clauses list the specific conditions
that will be considered a force majeure and therefore relieve a party of
liability under the contract. For those contracts, a party’s performance
under the contract will likely not be relieved absent a specific reference
to a pandemic, outbreak of disease, or other “catch-all” term.
Alternatively, other force majeure clauses are drafted more broadly, leaving
more discretion for the inclusion of pandemics such as COVID-19.
Assuming the applicability of a force majeure provision to COVID-19, parties
will still need to analyze whether their failure or inability to perform
under a contract was caused as a direct result of COVID-19 and the resulting
conditions, such as travel restrictions and/or quarantines. To maximize the
chance of a successful force majeure claim, parties should gather as much
documentation as possible demonstrating the relationship between COVID-19
and their failure to perform under the contract. Such evidence should
include relevant declarations from the World Health Organization (WHO),
Centers for Disease Control and Prevention (CDC), state and local
governments, and any other relevant organizations.
Additionally, parties must consider the terms of the force majeure clause
itself in the context of the remainder of the contract. For example, the
contract might contain certain notice provisions that a party is required to
abide by in the event of a force majeure or other anticipated inability to
comply with the contract. Alternatively, the contract may provide for
specific dispute resolution measures. Failure to comply with the specific
terms of the contract risks a party waiving their right to seek relief under
a force majeure provision.
Finally, a party seeking
relief under a force majeure provision must demonstrate that it exhausted
all reasonable means of compliance with the contract. Parties should
carefully document the alternative means of compliance that were considered
and the reasons they were either rejected or impossible. This mitigation of
damages will necessarily involve communicating with the other party or
parties to the contract and attempting to negotiate an alternative means of
compliance and/or a temporary forbearance of the contract until the
conditions created by COVID-19 have ceased. A party should seek relief under
a force majeure provision only after the alternatives have been exhausted.