What is Force Majeure and How Will it Apply to the Failure to Perform Commercial Agreements Due to Covid-19?
- posted: Jun. 24, 2020
For those that may have taken Spanish instead of French like I did, force majeure is a French term that refers to an event that literally means “greater force.” A federal court decision from 2018 describes force majeure as:
“[A] contractual clause that excuses performance of contractual obligations—either wholly or for the duration of the force majeure —upon the occurrence of a covered event which is beyond the control of either party to the contract.”
Because COVID-19 is such a recent event I have yet to read about a Florida court applying force majeure as an excuse for failing to perform a contract as agreed due to COVID-19. While many contracts will routinely include force majeure clauses, the application may not be so easy. I expect very few contracts will include “global pandemic” as an excuse for non-performance and because of this, other contractual terms such as “acts of God” may apply.
With respect to acts of God, Florida law provides that to excuse nonperformance, the following conditions must be met: (1) there must be no negligence or lack of due diligence on the part of the party asserting the defense; (2) the act or occurrence must be so extraordinary and unprecedented that human foresight could not have foreseen it or guarded against it; (3) the resulting effects could not be prevented or avoided by the exercise of reasonable care; and (4) the act or occurrence must have been the sole proximate cause of the nonperformance. While these conditions may seem to fit the unfortunate circumstances facing many businesses these days, the law generally requires a court to limit its analysis to the specific terms of the contract at issue and the facts which are unique to the case. Ultimately, the contract must contain language that excuses non-performance under circumstances which encompass an event like COVID-19 and COVID-19 must be the true reason for the inability to perform under the contract.
In short, some contracts may contain a force majeure clause which may be relied upon as a defense for non-performance due to COVID-19, but if these circumstances truly exist most contracts require the parties to give proper notice of the facts relating to the non-performance and require reasonable efforts to mitigate the potential damages to be incurred by either party. Any decision to invoke COVID-19 as a force majeure event for excusing performance under any contract should be considered very carefully after consulting with an attorney as a court may disagree with the non-performer’s interpretation of the contract.
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