Force Majeure Clauses: Does the Coronavirus Excuse Me From Performing My Contractual Obligations?

Black’s Law Dictionary defines “force majeure clause” as “a contractual provision allocating the risk if performance becomes impossible or impracticable as a result of an event or effect that the parties could not have anticipated or controlled.” Among the countless questions that have been raised during the coronavirus pandemic, one that seems to pop up frequently is whether the coronavirus is grounds for allowing a party to avoid performing their obligations under a contract. The answer really depends on the language in the contract and how New York law interprets these clauses, which unfortunately, is quite narrowly.

In a standard force majeure clause, the events that are often enumerated, can include: acts of God, such as flooding, tornadoes, hurricanes, fires, and earthquakes; war, and acts of terrorism; acts of government such as, eminent domain and changes in the law and regulations; and strikes and labor disputes. Under New York law, the courts interpret these provisions under narrow guidelines and have determined that if the event is not specifically listed in the clause, it is not covered. Moreover, if the contract does not include a force majeure clause, there is no valid defense to avoiding the contractual obligations.

This is not to say that the force majeure clause in your contract must say “coronavirus,” however, under New York law, in order to be protected there would need to be language such as “epidemics and/or pandemics” listed as covered events. If your contract does not include this specific language, unfortunately, it will be difficult, if not impossible, to argue that you can be excused from performing your side of the agreement. On the other hand, if your contract does include a force majeure clause as well as some language related to “government action/prohibitions,” it might be possible to argue that the New York State and New York City governmental orders affecting non-essential businesses, is a force majeure that prevents you from honoring your obligations under the contract.

In the alternative, another viable option could be raising the doctrine of impossibility, which excuses a party’s contract performance when an unforeseen and unanticipated event makes performance objectively impossible. Similarly to force majeure, this defense is reviewed on a narrow basis. New York courts are hesitant to apply this common law doctrine to excuse nonperformance where the parties could have allocated the risk of a foreseeable event in the contract. However, a good point to raise is that unforeseen government intervention (such as requiring all non-essential businesses like gyms, concert venues, etc., to close down) prevents the performance of the contract. On the other hand, if the business was just ordered to work from home, it would be quite difficult to argue objective impossibility in those circumstances.

While there has yet to be definitive litigation that resolves this issue as it relates to the coronavirus, surely, within the coming months, as the courts re-open their calendars and begin hearing cases on a regular basis, there will certainly be lawsuits addressing this issue directly.

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.