Coronavirus May Impact Your Business’s Contractual Obligations
COVID-19 is affecting every aspect of American life right now and that includes business contracts. Are you wondering if your contract(s) is/are still enforceable, or if this pandemic relieves any party’s obligation to perform within the terms of the contract(s)? Step one; determine if there is a “force majeure” clause in your contract(s). Below is an overview of force majeure clauses and their applicability to a pandemic such as COVID-19.
What is a force majeure clause and a force majeure event. A force majeure clause is a contractual provision allocating the risk of loss if performance of the contract becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled. A force majeure event is an unexpected event that prevents a party from doing or completing something that it has agreed to do.
Force majeure clauses and COVID-19. To determine if your business will be protected by a force majeure clause, you must look to the actual language of your contract. New York courts narrowly construe force majeure clauses, and require a force majeure clause to specify the events that a party claims to have prevented its performance. If the force majeure clause in your contract includes language such as epidemic, pandemic, quarantine, or the like, it may address the current COVID-19 situation your business is facing.