Force Majeure Contract Clauses Come Into Focus as the Coronavirus Causes Widespread Disruption in Daily Life

As the public health emergency stemming from the spread of COVID-19, commonly referred to as the Coronavirus, continues to worsen, its far-reaching effects are being felt outside of the public health arena. As the disruptions in everyday life become more pervasive, individuals and businesses should also be aware of the legal ramifications of what has now been formally declared a pandemic by the World Health Organization (WHO) and the U.S. Department of Health and Human Services. In particular, individuals and businesses should carefully examine their contracts to determine if there is a “Force Majeure” clause.

A Force Majeure clause­ – which means “superior force” in French, and may also be referred to as an “Act of God” clause – is a contract clause that may excuse a signatory to a contract from having to fulfill the terms of the contract, if it would be commercially impracticable, illegal or impossible to perform such duty under circumstances beyond the party’s control. Such circumstances may come in the form of a natural disaster, such as Hurricane Katrina in 2005, or possibly a public health crisis. Such a clause may exist in a wide variety of contracts, including anything from a supplier’s duty to deliver inventory to a small business, to a traveler’s purchase of a ticket for a flight.

Usually, a Force Majeure clause will spell out which circumstances can relieve the parties from their duties. Therefore, it is of the utmost importance that contracting parties examine Force Majeure clauses to determine if they include terms such as “epidemics,” “public health emergencies,” or “pandemics.”  Should one attempt to rely upon the Force Majeure clause in a contract, the next step is to consider any notice requirements.

Determining whether a Force Majeure clause applies given the current circumstances caused by the Coronavirus can help determine the rights and obligations of contracting parties under these ongoing and uncontrollable circumstances. If you need assistance in reviewing a Force Majeure clause to determine if you or a contracting party has been relieved of contractual duties, please know we at Ward, Shindle & Hall are ready to assist.