After what can be partly characterized as false hope that the U.S. might be able to keep COVID-19 at bay until a successful vaccine is ready for mass production, the past couple of months have shown that we will be dealing with the virus for quite some time. The fallout from the coronavirus is affecting nearly every part of our lives. Businesses, which often live and die based on the durability of their underlying contracts, must reconsider some of the provisions contained within those documents. One provision that has been getting a fair amount of attention in the midst of COVID-19 is the force majeure clause, which will be explored in this blog.
What is the Purpose of a Force Majeure Clause?
Often thought of as a boilerplate clause, the force majeure clause is designed to give one or both parties an out when it comes to their contractual obligations and responsibilities. Generally, a force majeure clause lays out certain events (referred to as “force majeure events”) that will trigger this contract defense in the event of non-performance. Phrases you might read in a typical force majeure clause include “acts of God” or “government actions.” Based on those descriptions alone, you might believe that COVID-19 fits nearly into the definition of a force majeure event. Unfortunately, it is not so clear-cut.
Does the Pandemic Apply to Force Majeure Clauses?
There is no clear-cut answer to this question, but it is generally an uphill battle to successfully invoke a force majeure clause. In Florida, the courts have historically construed force majeure clauses quite narrowly. In addition to having the event specifically named in the provision (such as using the word “pandemic”), a party to a contract must prove that the event was:
- Unforeseeable
- Outside the control of either party
- Directly responsible for the non-performance of the contract
There is no question that the subsequent economic downturn has affected nearly every industry and economic sector. However, the decline in business alone will likely not be sufficient to invoke the force majeure defense, because it was not a physical or legal hurdle to performing.
What Should Businesses Do Moving Forward?
As with many boilerplate provisions in a business contract, the force majeure clause needs to be altered to suit each party’s needs, objectives, and goals. It would be smart to include the words “pandemic” and “governmental action” to ensure the clause is applicable to the pandemic. Make sure you know, as a business owner, what you need to do in order to successfully invoke the force majeure defense (if needed).
Currently invoking the force majeure clause for contracts that were written before coronavirus might be difficult depending on how yours is written. The best way to resolve these situations is to retain an experienced business lawyer who is skilled at writing effective business contracts and navigating litigation efficiently. Waserstein & Nunez features attorneys and staff that can handle a wide spectrum of legal matters, and we would be honored to discuss your situation with you. Call the firm at 305-563-1011 to speak with a member of our team today.
Waserstein & Nunez, PLLC
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