The COVID-19 outbreak has made it difficult or impossible to perform some of my contractual obligations. Can I be excused from performance?
Unfortunately, there is not a simple yes or no answer to this question. However, we can provide you several factors to consider as you work with legal counsel to devise a strategy.
First, does the contract have a force majeure clause? Many contracts include force majeure clauses that may excuse a party’s non-performance. In the United States, the ability to declare force majeure is generally governed by the specific terms of the individual contract at issue.
- Governing law. An important initial issue to consider is what law governs the contract, because the scope and effect of a force majeure clause varies by jurisdiction.
- Fact-driven analysis. Whatever law governs, whether a force majeure clause will actually excuse a party’s non-performance is a fact-specific determination. In the case of the COVID-19 outbreak, some relevant facts include whether it is impossible to perform a contract because of a government regulation (e.g., a quarantine or mandatory travel restriction), or whether performance has become more difficult or expensive, but not impossible (e.g., a price hike caused by supply chain interruptions).
- Text of the FM clause. The particular language of the force majeure clause is also important. Depending upon the law that governs the contract, specific mention of “disease,” “epidemic,” “pandemic,” or “acts of government” may be more helpful than general terms such as “acts of God” and “matters outside of the reasonable control of the parties.”
- The long road. It is important to note that when a force majeure event is disputed, parties may not know the result until litigation has been concluded months to years later. As a practical matter, many businesses may focus on non-legal solutions that might mitigate the impact.
Second, do you have other grounds that could excuse non-performance? Even if there is no force majeure clause, there may be other avenues to potentially excuse non-performance. Some jurisdictions recognize impracticability and frustration of purpose as excuses for contractual-nonperformance. In addition, the UCC (as adopted in Texas) creates a limited statutory defense of impracticability for sellers in certain contracts for the sale of goods.
Last updated March 16
These materials are made available by Jackson Walker for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.