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Force Majeure and Coronavirus: A Checklist

I skimmed hundreds of pages of client alerts and other publications. Here’s a distillation.

What is force majeure?

A contract defense allowing you to (1) delay performance, (2) excuse performance, or (3) limit liability from nonperformance. You invoke force majeure over an event (or the effect of an event) that you couldn’t control or reasonably anticipate before signing the contract.

What will determine whether you can assert force majeure?

(1) The contract: Relevant provisions might not include the term “force majeure,” so you should also search for “acts of God,” “act of God,” “impracticable,” “impossible,” “governmental regulation,” and so forth.

(2) Governing law:

  • Contract Law: The contract itself governs, though courts play a role in interpretation and remedies. In the US, for example, state law generally enforces force majeure provisions, but states differ in how narrowly or broadly the courts construe the list of what qualifies as force majeure and the available remedies.
  • Common law: Even if a contract has no force majeure provision, the impossibility and impracticability doctrines might come into play.
  • UCC § 2-615 might come into play.
  • CivilForce majeure is generally implied in contracts.

(3) Facts: Can change quickly because governmental restrictions could make performance only impracticable one week but impossible the next.

What matters most in the contract?

(1) Description and scope of force majeure event, especially the examples and whether they are exhaustive vs. illustrative

  • Easier to invoke: references to “pandemic,” “disease,” “epidemic.” Also a reference to governmental restrictions (if absolute—such as a ban on groups making performance impossible).
  • Harder to invoke: broad references to “acts of God,” “national emergencies,” “disasters.”
  • Possible to invoke: when effect is same but cause is different, as in “labor strikes” or “riots.”
  • Not enough to invoke: general financial collapse (economic effects of 9-11 were found insufficient, for example).
  • State law matters a lot: Would a court look at the examples as just representative? Do events not listed have to have been unforeseeable?

(2) Relationship between the event (the virus) or effect of the event (such as bans) and your ability to perform

  • Scrutinize language on (1) foreseeability, (2) duties to anticipate/ take corrective action, and (3) effect of event on performance: Did the virus “affect” vs. “impede” vs. “prevent”  performance? Did it make performance “impossible” vs. “impractical”? Here are a few guideposts:
    • Governmental interference in a contract is not force majeure even if an outright ban would be.
    • Financial pain does not suffice, either.
      • Example: It’s hard for a conference venue to cancel a contract over low attendance, even at a huge loss, because the government doesn’t allow gatherings with groups of 50 or more. Courts have held that avian flu, for example, was not force majeure merely because it upended supply and demand.
    • Nor does U.S. case law generally allow you to invoke force majeure on behalf of a subcontractor or other third party that cannot perform.
  • Does force majeure allow you to get out of the entire contract or only certain provisions?
  • If one party invokes force majeure, are the other parties also able to delay or excuse performance?

What else should I know if I want to invoke force majeure?

  • You may need to perform contractual obligations or satisfy conditions before invoking force majeure.
  • You may have a contractual duty to mitigate harm (and even if you don’t, you may have a common-law duty to mitigate).
  • You may need to provide notice (know that your counterparty could respond with anticipatory-repudiation claims).