The Force Majeure Clause: Contractual Rights to be Center Stage in COVID-19 Virus Response

Each passing day of the COVID-19 pandemic brings new challenges, with government officials saying it could be, at best, months before we return to normalcy. 

Given the economic upheaval and looming cash flow restrictions that are resulting from increasingly harsh measures to control the pandemic, business leaders at all levels are asking themselves: what are my contract obligations and how do I meet them? Part of that assessment must include an analysis of any “force majeure” clause in a contract. 

What is “force majeure”? 

Force majeure contemplates events that the parties can neither reasonably anticipate nor control, and which prevent one or more parties from performing obligations under the contract. Typical examples are wars, uprisings, civil disturbances, and natural disasters. However, a force majeure event must be more than sheer misfortune. 

While an ‘Act of God’ might be identified as a force majeure event, that does not necessarily mean a court would excuse a party’s performance based on a health pandemic. Florida courts traditionally have held, for example, that government policies which indirectly impact the economic conditions of a contract are not force majeure events. Nonperformance of a contractual obligation due to economic hardship is not enough. Determining what is covered under a force majeure clause is therefore essential. 

Assistance – Know where to turn for help. 

There is no doubt that litigation related to contractual obligations and the applicability of force majeure clauses to the COVID-19 pandemic is going to be center stage in many business disputes in the months and years to come. 

Having a sound team to help you understand your rights and obligations as well as dealing with the fall-out from difficult decisions in the weeks and months ahead is essential to your ability to weather this proverbial storm. As a global law firm with a depth of resources and experience in commercial dispute resolution, Diaz, Reus & Targ, LLP is well-positioned to assist during this time of uncertainty. 

We have implemented remote-work strategies across our offices. We remain fully accessible and stand ready to help our clients and the communities that we serve. If we can be of any assistance, please contact us.

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