Contracts can be modified and excused by the current COVID-19 pandemic pursuant to the doctrines of commercial impracticability, impossibility and frustration of purpose.
As businesses large and small face, the prospect of contractual breaches due to the impact of COVID-19 and related governmental orders, force majeure provisions and other contractual defenses are coming into focus. This is clearly the case as the result of the worldwide COVID-19 pandemic, the World Health Organization declaring the COVID-19 outbreak a pandemic and a Public Health Emergency of International Concern, multiple declarations of national emergency by President Donald Trump, and all states imposing either stay-at-home restrictions or guidelines.
A contract may either explicitly list all events that qualify as a force majeure event or generally define a force majeure event as an event beyond the parties’ control. While the latter provision leaves room for interpretation, courts are the final authority on whether an event qualifies as a force majeure event under a given contract and whether a party’s performance is truly impossible.
It should be noted that the declaration of pandemic, standing alone, without a specific reference to “pandemics” in a force majeure clause, will likely not automatically constitute a force majeure event. Alternatively, if contract terms are silent on pandemics, epidemics, quarantine, or other viral outbreaks, there may be other language in the contract that triggers a force majeure clause.
Ultimately, whether a party can exercise its rights under a force majeure clause or whether a party may invoke a common law defense to nonperformance is a question answered by legal analysis of the subject contract based on the facts at hand.
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