Do You Believe in Magic?: Force Majeure and COVID-19

A review of the legal resources available since the outbreak of the COVID-19 pandemic might lead one to wonder if points are being awarded for every time someone utters the phrase “force majeure.” But, despite an increase in the frequency of its invocation, force majeure (score 1 point) is not a talisman. No “abracadabra” or “bippity boppity boo” here. It is merely a name given to a contract clause.

Common law contract defenses (illegality and impossibility to name two) operate independently of the words and provisions in a party’s contract. No matter what the contract says, if the defendant satisfies its burden to prove illegality or impossibility, as defined under the law of the particular jurisdiction that is applied, it can escape some or all of its contractual obligations.

The same is not true for force majeure, which will depend on a detailed examination of the contract itself, all of it. A party seeking to use force majeure as a defense must ask a lot of questions: Does my contract contain a force majeure clause? If it does, what does it say? Is the clause clear? Well-written? How specific is the clause in enumerating events excusing performance? How specific is the clause in identifying what elements of performance are excused: some or all of them? And for how long? Courts typically start (and, as a result, often end) their analysis by determining whether the event that purportedly prevents contract performance was envisioned, contracted-for, and embodied in the language of the parties’ contract. What your contract says will matter.

Pay attention as well to the notice provisions covering force majeure. How promptly must the counterparty be notified after the event that purportedly triggers your invocation of the force majeure clause? This may prove important in allowing the other party to mitigate potential losses.

With a little magic, it may be that the force majeure clause in your contract explicitly identifies epidemic or pandemic as a covered event. Or, the clause may generally refer to an “Act of God,” contract language that will require interpretation. Does “Act of God” follow a list of identified events like hurricane, tornado, and flood? Turn to ejusdem generis for possible guidance: General wording that follows a list of specific things is typically restricted to things of the type listed.

Even with a rock-solid force majeure clause that plainly and expressly covers pandemic, you may not be in the clear. You must still take specific steps to mitigate damages and, likely, perform even in unfavorable, economically challenging conditions. Not a talisman indeed.

Our team is experienced, no magic needed, in prosecuting and defending contract cases. We achieve results for our clients through creativity and a command of the legal authority that governs how each contract is to be interpreted and the defenses that are available. We look at contracts as a whole, considering how the various clauses work together—or don’t. And we advise clients as they prepare new contracts and revise existing ones, offering guidance on how to best protect themselves from the unexpected and the mundane alike. Wherever you find yourself (wanting protection through new contracts, seeking to enforce old ones, or hoping to get out of contract obligations rendered impossible or infeasible by current events), we can help.

Arthur F. Fergenson is a Senior Counsel in our Maryland office.
Heather L. Williams is a Partner in our Maryland office.