As many businesses have been shut down due to the novel coronavirus pandemic, companies have lost revenue, experienced staff shortages, had interruptions in supply chains, and many more difficulties. All of these circumstances can make it challenging or impossible for a company to fulfill its obligations under one or more existing contracts. Whether a venue cannot hold a planned event, a caterer cannot provide food ordered, a plant cannot deliver scheduled inventory to a store, or any other similar situation, contract disputes can quickly arise.
Breach of contract can result in significant losses to one party and potential liability to the other. Usually, the party who breached the contract will try to defend against the claims and prevent liability whenever possible. One common defense we are likely to see in relation to COVID-19 is the force majeure clause of a contract. Whether you are a party claiming breach of contract or defending against a claim, it is important to understand how force majeure clauses might impact your contract dispute.
How Force Majeure Clauses Work
A force majeure (meaning superior force) clause allows one party to terminate a contract when unforeseeable circumstances prevent that party from fulfilling their end of the bargain. While these clauses are commonly associated with natural disasters or “acts of God,” they can be invoked when other types of situations make completing a contract impractical or impossible.
However, which types of events might qualify as force majeure will depend on the language of each individual contract. Generally speaking, the party that wishes to terminate the contract will have the burden of proving several points, including:
- The event (here, the COVID-19 pandemic) was beyond their control and unforeseeable
- The event led to the failure to perform under the contract
- The terminating party tried in good faith to perform
- Performance remained impossible or unreasonably costly due to the circumstances in question
Whether a force majeure clause excuses performance on a contract will need to be determined on a case-by-case basis. If you are presenting a force majeure defense or challenging one, it is imperative that you have an experienced business attorney in Fargo evaluating your situation and helping to resolve the contract dispute.
Consult with a Fargo Business Lawyer for More Information
There is no question that the COVID-19 outbreak has left many company owners in precarious situations. Often, having the advice and representation of a skilled business attorney can help you move forward and resolve legal issues in the most favorable manner. Please feel free to email our experienced business attorney Stephen Welle directly or call O’Keeffe O’Brien Lyson Attorneys at 701-235-8000 or toll-free at 877-235-8002.