Force Majeure Clauses and the COVID-19 Pandemic

Force Majeure Clauses and the COVID-19 Pandemic

The term “force majeure” translates literally from French as superior force.[1] Black’s Law Dictionary defines force majeure as “[a]n event or effect that can be neither anticipated nor controlled.”[2]  In the law, it is the term for a contract provision that allocates the risk of specified events including natural and man-made events.  If that unlikely event occurs, the impacted party is excused from performance. [3] The events can include acts of God, floods, fires, earthquakes, tornadoes, etc., war, terrorism, government orders, embargoes, organized labor strikes, etc.

A force majeure clause relieves a party from performing contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.[4]  While the economic recession in 2008 was found not to be a force majeure event,[5] government orders to shut down non-essential businesses in favor of social distancing due to the COVID-19 pandemic may constitute force majeure.

As is so often the case in the law, the answer will depend on the language in your contract.  If your contract does not have a force majeure clause, you have not bargained for its protection, and the argument will be much harder to make.  If you do have the language in your contract, a judge will have to determine whether this event fits the parameters you bargained for and wrote in your contract.  Nevada courts have held that when a party makes a contract and reduces it to writing, he must abide by its terms as plainly stated therein.[6]  If the clause is clear and unambiguous, the court must construe it from the language therein.[7]

Please contact one of our attorneys to review your contract if it contains a force majeure clause.  You may be excused from performance.

 

[1] https://www.merriam-webster.com/dictionary/force%20majeure, accessed March 19, 2020.

[2] https://www.lexology.com/library/detail.aspx?g=e44183ab-74cf-4f2d-906a-7d7850427953, accessed March 19, 2020.

[3] One World Trade Ctr., LLC v. Cantor Fitzgerald Sec., 789 N.Y.S.2d 652, 655 (N.Y. Sup. Ct. 2004).

[4] https://www.venable.com/insights/publications/2011/02/understanding-force-majeure-clauses, accessed March 19, 2020.

[5] See Elavon, Inc. v. Wachovia Bank, Nat’l Ass’n, 841 F. Supp. 2d 1298 (N.D. Ga. 2011).

[6] See Chiquita Mining Co. V. Fairbanks, Morse & Co., 60 Nev. 142, 104 P.2d 191 (1940); Ellison v. California State Auto Ass’n, 106 Nev. 601, 797 P.2d 975 (1990).

[7] Southern Trust Mortg. Co. v. K&B Door Co., Inc., 104 Nev. 564, 763 P.2d 353 (1988).

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Jay Young, Mediator and Arbitrator

Jay Young is a Las Vegas, Nevada attorney. His practice focuses on acting as an Arbitrator and Mediator. Mr. Young can be reached at 702.667.4868 or at jay@h2law.com. The information provided on this site does not, and is not intended to constitute legal advice. You understand each legal matter should be considered to be unique and subject to varying results. You should not take or refrain from taking action based on any information contained on this website without first consulting legal counsel, as it is not intended to advise you on your particular matter. Further, you understand that no guarantee is given that the information contained herein is an accurate statement of the law at any given point in time, as the law is constantly changing. Guest bloggers are responsible for their own content, which is not to be construed as an article authored by Jay Young. Please see http://nevadalaw.info/disclaimer

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