Does a Force Majeure Provision Excuse Performance of a Contract Due to COVID-19?

This blog is a follow-up to our previous blog: Is Covid-19 an “Act of God” Excusing Performance of a Contract? Many contracts contain an obscure provision that allows for non-performance of the contract due to circumstances beyond the parties’ control. These provisions are typically called “force majeure” provisions, and they are often overlooked or ignored in the drafting of a contract. But now, more than ever, during the time of the COVID-19 outbreak, parties should be vigilant in considering such provisions in the negotiation and drafting of contracts.

The phrase “force majeure” is French for “superior force.” Generally, a force majeure provision is defined as “a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.”[1] But in contracts today, it is up to the parties to define what circumstances qualify under such a provision. In addition to an act of God, some examples include an act of government authority, severe weather, disease or pandemic, and strike. If a contract is not performed due to one of the circumstances explicitly provided for in the provision, then the parties will bear their own losses.

On the other hand, when force majeure provisions are general and left to interpretation, courts have to determine what should or should not be covered. Some courts have found that broad and non-specific force majeure provisions are unenforceable because they are “illusory” and impossible to apply. Florida courts, however, have generally held that broad force majeure provisions are enforceable—even those excusing performance due to foreseeable or unforeseeable events—so long as the language in the contract allows for it.[2] If the force majeure provision limits the excusable circumstances to those beyond the parties’ control, and is not left to discretion, then the obligations under the contract are not illusory.

With the recent outbreak of COVID-19, many parties have faced issues with contracts, such as cancelling a contract with a vendor for an event, delayed performance of a contract for delivery of certain items, or cancellation or non-performance under a contract for employment. This will inevitably lead to years of litigation.

Whether a party’s non-performance is excusable due to the COVID-19 outbreak starts with the force majeure provision (if there is one included in the contract). As you almost always hear from a lawyer, it will depend on the facts and circumstances of each case. If the provision provides for non-performance due to disease or pandemic, then the non-performance should be covered. If the provision allows for non-performance due to an act of government authority (or something similar), then the excused performance is a little less clear and will likely depend on the government mandates—such as a quarantine or “stay-at-home” order—that are in place where performance is required.

Additionally, the non-performing party will have the burden to show that their non-performance resulted from such pandemic or act of government authority.[3] For instance, if a party’s performance under a contract is only to make a payment, then the party’s non-performance of payment may or may not result from the government’s order to quarantine at home. Likewise, a party’s non-performance of payment may or may not result from the actual disease or pandemic. Again, the facts of each case and the language of the contract will guide the court’s interpretation of whether the non-performance resulted from the circumstances.

Beyond the force majeure provision, other terms or provisions of the contract may also provide guidance, such as provisions on termination, impossibility of performance, delays, or the like. Be sure to examine your contracts for any of these provisions in order to evaluate and determine how you will react to any disruption or non-performance of your contract.

If you have a contract dispute resulting from the COVID-19 outbreak, give us a call for a free initial consultation. Rabin Kammerer Johnson handles many forms of business litigation, including contract disputes.

[1] Black’s Law Dictionary, 718 (9th ed. 2009).

[2] Home Devco/Tivoli Isles LLC v. Silver, 26 So. 3d 718, 722 (Fla. 4th DCA 2010) (noting “that force majeure clauses broader than the scope of impossibility are enforceable under Florida law”).

[3] See ARHC NVWELFL01, LLC v. Chatsworth at Wellington Green, LLC, No. 18-80712, 2019 WL 4694146, at *4 (S.D. Fla. 2019) (holding that the non-performing party failed to show that their non-performance resulted from the government action).