Written by: Nicole M. Garcia, Esq.
“Whatever good things we build end up building us“ – Jim Rohn
Currently, we are facing constant rapid changes on a daily basis in our personal and professional lives due to the COVID-19 pandemic. It seems this virus is forcing us to think outside of the box, evaluate and reinvent ourselves and the way we do business.
Typically, when forming a contract, a specific clause is added as additional protection in the event a party is restricted from performing their part. A “Force Majeure” clause is a provision that excuses a party from not performing its contractual obligations where such performance becomes impossible or impracticable. Typically, performance will become impossible or impracticable due to an event, occurrence, or circumstance that parties could not have anticipated or controlled. It is often viewed as a defense to non-performance. When drafting this clause “force majeure” and an “act of God” are too often confused to mean one and the same. However, they are not!
An “Act of God” is an unpredictable natural event (i.e. a fire, storm, earthquake, flood, tsunami, or other natural events), which prevents or interferes with a parties contract performance. On the other hand “force majeure” is actually an unpredicted human-initiated event (i.e. terrorism, war, epidemics, strikes, or other failures to act upon by government authorities) that could have been predicted or controlled by a party in the contract. These events are non-inclusive are will vary case by case.
However, the language and the express terms of a contract will typically define and provide guidance as to what types of events constitute “force majeure. Such clauses will be subject to traditional principles of contract interpretation. Courts will look to the terms of the contract as the best evidence of the parties’ intent, and the plain meaning of the words used will control. Courts will also consider the contract as a whole, and will generally not consider any one specific provision in isolation. When a contract is unambiguous and clear, courts will interpret the contract in accordance with its plain meaning. However, Courts will find a contract to be ambiguous if it is subject to more than one interpretation. Additionally, if the contract has conflicting provisions, the courts will interpret the contract.
A party relying on a “force majeure” clause to excuse performance bears the burden of proving that the event was beyond its control and without its fault or negligence, even if the event is viewed as extreme and unforeseeable. That party also bears the burden of proving that the failure to perform was caused by the event and that regardless of their due diligence and good faith, their performance remained impossible or unreasonably expensive. However, economic hardship alone will rarely qualify as a “force majeure”. Events, such as a general economic downturn, inflation, or a drop or increase in commodity prices generally do not qualify as a “force majeure” because they are foreseeable events and thus known risks assumed by the contracting parties.
If seeking to invoke a “force majeure” clause, a party must be sure to comply with any other contract provision requiring notice or any other applicable condition precedent. Additionally, parties should examine their rights and obligations once the “force majeure” event has ended. Additionally, a party invoking a “force majeure” clause will usually have a duty to undertake reasonable efforts to mitigate the event and its consequences. Usually, neither party to a contract is responsible to the other for damages resulting from a loss occasioned by a “force majeure” event or act of God, unless the risk of such loss is expressly assumed in the language of the contract.
This pandemic now poses the question and leaves us wondering as to whether COVID-19 will be categorized as an “Act of God” or an “unpredicted human initiated event”?
Typically, courts narrowly construe this clause. While this burden will likely not be difficult where the contract lists specific events like viruses, epidemics or pandemics, the analysis may become more complicated when the “force majeure” clause is vague and is categorized by the law to be “boilerplate” language.
Therefore, as to whether disruption based on a pandemic like COVID-19 can excuse performance will depend on the language of the particular “force majeure” clause within the contract. Courts will need to analyze on a case-by-case basis. Under the law of many states the “force majeure” clause will be triggered only where the clause expressly includes the contingent event. Where a “force majeure” clause explicitly uses terms such as viruses, disease, epidemic, pandemic, quarantine, “act of government” or “state of emergency,” parties may, depending on the circumstances, be able to assert “force majeure” as a defense to non-performance or anticipatory breach in the case of the COVID-19 pandemic.
As a nation we are certainly facing an immense amount of uncertainty. However one thing is for certain, we will witness the evolution of families, daily life, businesses, and the law. If you are being affected by the COVID-19 pandemic and are facing legal troubles please contact the Florida Construction Law Group and we will assist you and ensure everything is set up and handled properly throughout the project.