Question

This week, we learned in the reading and handout that sometimes your contract obligations can be set aside because something outside your control makes it impossible for you to perform your duties, such as a war or hurricane.

Keeping with tying current events to our class studies, discuss how "impossibility of contract performance" could apply to the Corona Virus crisis.

Name a type of contract right now that may be impossible to perform because of the virus.

Answer 1

Fundamentally, a force majeure is an unforeseen or unavoidable event beyond the reasonable control of the parties to an agreement that serves as an excuse or delay in the affected party’s performance of its obligations under the agreement. Common force majeure events include floods, fires, earthquakes, wars, terrorist attacks, and government orders. But this is not an exhaustive list of events and there lies the problem.
The Force Majeure clause excuses non-performance of contractual obligations for events specified under the clause. But if an event not specified under the force majeure provision occurs, then the impacted party may not be excused from performance. Simply put, if the impacted party is unable to perform, it is likely in breach of the contract. If the contract does not specify events such as “epidemics and quarantines” or “pandemics” in its Force Majeure clause, a party may have a difficult time claiming they are excused from contractual obligations because COVID-19 has rendered a party unable to perform the contractual duties.
Part of the challenge lies with the fact that there is no universal standard definition for force majeure, and they often vary across agreement types and industries. The performance of one party might be completely excused by one force majeure provision, while under another, the contract might defer performance of the obligation until the force majeure event ceases, and yet another may require strict performance of the obligations or face penalty.

So, when public health crises or pandemic events such as the current COVID-19 outbreak are not explicitly included in the agreements—as is most commonly observed—creative arguments and legal advocacy will be critical in creating the best interpretation of the provision to support a force majeure defense.

For example- when there is lockdown as per the government directive, parties having contract to deliver non essential goods as defined by govt can not deliver goods to receipient on agreed timeline leading to breach of contarct.