From supply delays to event cancellations, businesses are failing to meet their obligations due to the recent global COVID-19 pandemic. However, a common contractual term may help determine whether a company is relieved from a contractual obligation. If your business is having trouble meeting obligations under a contract due to the COVID-19 outbreak or a business that you are working with is failing to meet contractual obligations and citing the COVID-19 outbreak as a reason for not being able to perform under the contract, a review of the contract that was signed by the parties will be necessary to determine whether a party may be relieved from a responsibility under the contract.
A force majeure or an “Act of God” clause in a contract can, under certain circumstances, provide a party with the ability to avoid liability for failing to live up to a contractual obligation when that parties ability to perform under the contract is made impossible, not just more difficult, because of an extraordinary and uncontrollable event outside the party’s control.
Many businesses may have a force majeure or “Act of God” clause in their contract. However, every force majeure clause is different and the exact language in the contract may determine whether COVID-19 makes nonperformance by a business acceptable. There are many factors that a Court will consider in determining whether the COVID-19 outbreak would be an applicable “Act of God” under the contract, including whether force majeure is listed as a general term or if there are specific terms in the contract relating to the current situation, such as “acts of government” or “pandemics;”
There are many factors that a Court will consider when a business is trying to invoke a force majeure clause, including whether the business has made efforts to mitigate the impacts of the coronavirus outbreak on their company and if it can be proven in court.
If a business does not have a force majeure clause listed in their contract, there may be local statutes and other laws that can be invoked but again it very much depends on the circumstances surrounding why a business fails to meet contractual obligations.
Ultimately, the situation is ever changing and it remains to be seen how the courts will react. It is up to businesses to review their contracts thoroughly to determine what further actions need to be taken. If your business is having issues satisfying contractual obligations or is being prevented from satisfying contractual obligations by another party’s failure to perform, seeking advice from an experienced attorney will help your business to determine its options. The experienced attorneys at Halling & Cayo, S.C. can review any contracts associated with the issues surrounding your business and provide you with your options. Please contact our office today for a free consultation.
David Seth Hill focuses his practice on bankruptcy, securities litigation, creditor’s rights, collections, business law, and commercial litigation. He has experience handling a very broad range of civil litigation matters and represents clients throughout Wisconsin. One of Seth’s unique skills is that he has a great deal of experience in obtaining funds in order to satisfy judgments for his clients. Seth is a 2009 graduate of Thomas M. Cooley Law School. While in law school Seth was a legal intern for the Innocence Project. He also served as an editor on the Law Review. He received his Undergraduate degree in Psychology from Montana State University in 2005.