After taking the necessary steps to protect yourself, your family and your staff in response to the developing coronavirus pandemic, you may need to consider the effect that the government’s increasing restrictions may have on your ability to conduct business. Whether you are looking to enforce your rights under a contract or you need to get out from under a contractual obligation that you cannot meet because of a government restriction, you will have to determine whether your contract has a force majeure clause, and if so, the extent of its scope.
A force majeure clause refers to extraordinary events outside the control of the contracting parties that either excuse a party’s performance under a contract or limit a party’s damages. They often include acts of war, terrorism, labor strikes and acts of God, such has as hurricanes, floods, etc. The parties’ rights are determined by the precise language they agree to put in the contract. However, while your contract may not specifically reference epidemics or pandemics in the force majeure clause, such clauses often extend to decisions of the federal, state and local governments acting in their sovereign capacities. Thus, depending on that language the contracting parties use, a federal, state or municipal order restricting enterprise or movement, such as an order to close a business or a port of entry, may well excuse performance.
Even if your contract does not contain a force majeure clause, relief from a contractual obligation may still be available under the doctrine of impossibility. This doctrine excuses performance where a change of circumstances renders performance impossible. Courts are reluctant to relieve a party of an obligation under this doctrine, however, and will enforce the contract where the changed circumstances merely render performance more difficult or expensive.