Cause of Non Performance In Force Majeure Contract Disputes
A force majeure clause in a contract may excuse a party’s performance if there is an unpreventable occurrence that disrupts contract performance. The COVID-19 pandemic may be such an occurrence as well as many of COVID-19’s affects. For any of these events to trigger force majeure, however, they mus
Was COVID-19 the Cause of Non-Performance?For performance to be excused, force majeure requires that a specified occurrence be the actual cause of non-performance. Other events, even those resulting from a specified event, may be outside of the scope of the force majeure clause. For example, if COVID-19 makes performance with a contract more costly or less profitable, force majeure may not apply because the actual cause of non-performance may be economic concerns. On the other hand, if an individual contracts COVID-19 and is hospitalized, COVID-19 itself may be the actual cause of non-performance.
Other events resulting from COVID-19 can also form the basis for a force majeure defense. Government shut-down of businesses, stay at home orders, and closures of ports of entry enacted in response to COVID-19 may constitute a force majeure event if they fall within the scope of the force majeure clause. Again, these events must be the actual cause of non-performance, and mere economic hardship may not be enough.
What is the Language of the Force Majeure ClauseForce majeure clauses often specifically list the events that will discharge performance. Whether COVID-19 or an event enacted in response discharges performance depends on the specific language of the force majeure clause. Force majeure clause that reference “epidemics” or “pandemics” would encompass COVID-19 disruptions. Further, force majeure clauses that include language such as “compliance with any law or governmental order, rule, regulation or direction” may excuse performance where State and local regulations in response to COVID-19 cause the non-performance.