The spread of COVID-19 has proved incredibly disruptive, forcing the postponement or cancellation of many private and public events. High profile events that suffered cancellation included the Houston Livestock Show and Rodeo and Austin’s iconic South by Southwest (SXSW). State and local orders mandating social distancing have also made many private events impossible, including weddings, proms, reunions, and others. Many of these events were scheduled in advance, with down payments made and contracts signed well before any documented COVID-19 cases in the US.
What happens when it becomes impossible for one party to perform their contractual duties because of Coronavirus? The first step in determining a party’s rights and obligations is to examine the contract’s force majeure clause.
Force Majeure And Acts of God
A force majeure clause is a provision in a contract that excuses a party’s contractual obligations that have become impossible or impracticable due to an event that the parties could not have anticipated or controlled. These clauses are designed to excuse a party’s failure to perform if the failure couldn’t be avoided by due diligence and care. They are most invoked in cases of natural disasters, acts of war and terrorism, and other unforeseeable “acts of god.”
There is no standard or boilerplate force majeure clause; each industry will tailor their list of triggering events to their needs and is ultimately subject to negotiation. Application of a clause comes down to what events are listed specifically, and if the event isn’t specifically listed, whether or not it was foreseeable.
Does COVID-19 Qualify as an “Act of God?”
What does and does not qualify as an unforeseeable “act of god” varies by jurisdiction. Texas courts have suggested that the term is limited to matters solely caused by forces of nature, as discussed in McWilliams v. Masterson, 112 S.W.3d 314, 320 (Tex. App. – Amarillo 2003, pet. denied). Whether or not a global pandemic like coronavirus qualifies has not been made clear by the courts, and will likely rely on the contractual language and facts in each specific case.
Force majeure clauses use different standards such as performance, impossibility, impracticability and illegality to determine whether there is valid excuse for performance. In the context of Covid-19 orders, whether limitations on gatherings of 10 or more is discouraged or made unlawful by local authorities may play a big part in determining enforceability.
Catchall provisions can make an impact too. A catchall phrase like “any other event beyond the reasonable control of a party” is helpful to a party claiming force majeure, but a phrase like “any other similar event” will narrow its applicability.
COVID-19 has created unprecedented changes to life as we know it, and the effects are far-reaching. It is unclear how judicial analysis of force majeure clauses will be affected in the wake of an event that is so negatively and universally impactful on every segment of the population. Many businesses and consumers have questions about large deposits and performance obligations for events such as weddings, conferences, and trade shows. Rights and obligations vary according to the facts and terms of the contract, so it is prudent to seek the help of an experienced attorney to navigate these complex issues.
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