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Coronavirus has caused states to shut down schools, nonessential businesses, and large gatherings. This means that events and performances that were under contracts have also been canceled. Of course, this has led to some contract disputes regarding force majeure.
What Is Force Majeure?
The definition of “force majeure” is a common contract clause that relieves a party of its contractual obligations due to an unforeseen and uncontrollable event.
The types of force majeure events are outlined within the contract. Each contract is free to state which events are force majeure. The events describe could be, but not limited to:
- Acts of government
- Epidemics
- Hurricanes
- Earthquakes
- Terrorism
- War
- Riot
- Act of God
For the most part, contracts typically allow for the obligated party to be relieved of its duties. This simply means that as long as the contract covers pandemics or some other impediment caused by Coronavirus, then the obligated party does not have to perform during the Coronavirus.
What to Do If Invoking Force Majeure?
If a party to a contract wants to excuse itself from their obligations due to force majeure, then it should first read the contract. There is the possibility that either an illness or pandemic is not mentioned as a force majeure within the contract. If this happens to be the case, then force majeure will not hold up as a viable reason to excuse contractual duties.
If the contract does cover illness or a pandemic then the invoking party should notify the other within a specific amount of time. The amount of time required for notice should be specified within the contract.
However, this does not mean the contract is done and over with. So, in the event of a force majeure, there could be additional steps.
Other Aspects to Look for in a Force Majeure Clause
The fact that force majeure has been invoked does not mean the invoking party will no longer have to perform their duties.
In some contracts, a party might still have to perform after the force majeure has passed and no longer affects the party’s ability to perform. As for Coronavirus, this means that the invoking party will still have to perform once the party has “passed”.
Unless there is specific language regarding what constitutes a virus no longer being a force majeure, then deciding when a party can resume its obligation might require some negotiation with your attorney. Coronavirus is unlike other force majeure because there’s no clear ending.
Payment During a Force Majeure
Sometimes, even though a party might be freed of their obligations then it doesn’t mean they are free from payment. Venues or other businesses alike may still require that payment or some other economic incentive be made by the invoking party.
It all depends on the language of the contract.
Contract Disputes Over Force Majeure
If you are thinking about invoking force majeure, or you’re currently in a contract dispute regarding force majeure, then reach out to an experienced attorney. It’s crucial not to wait for Coronavirus to pass over and then take care of the matter. Most likely, the opposing side has already asked legal counsel to examine the contract and prepare a defense.
You should do the same. Have an experienced commercial litigator look over your contract. It is the best way to ensure that you’re protected during and after Coronavirus.
For more information about Force Majeure, or other questions about contract disputes, send us a message or fill out the free form below.
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