- Business Law
Force Majeure clauses are regularly included in a multitude of contracts. These provisions excuse performance of various contractual obligations in the event that performance of some aspect of the contract is delayed or made impossible by external factors outside the control of the parties. These force majeure events typically include a laundry list of possibilities such as: fire, explosion, severe weather events, government intervention, declared state of emergency, strike, war, act of god, etc. These provisions are critical to avoiding liability for a breach of contract if one of these events do occur. Force majeure provisions are increasingly important given the outbreak of Covid-19 as a global pandemic.
While these provisions are routinely included in contracts, the scope of these clauses varies from contract to contract. In order to determine whether or not a force majeure clause applies, it is necessary to analyze the specific language used.
The first thing to determine is: what constitutes a triggering event? If the force majeure clause contains language that explicitly lists “pandemic,” “state of emergency,” “government intervention,” or other similar language then a triggering event has occurred because of Covid-19. On March 10, 2020, Colorado declared a state of emergency in response to the Covid-19 outbreak. On March 11, 2020, the World Health Organization declared Covid-19 a pandemic. On March 25, 2020, Gov. Polis issued the stay at home order. These events would clearly constitute triggering events if the force majeure clause contained the above phrases. Even if the force majeure clause in your contract does not specifically list these terms, there may be a catchall in the clause, which allows for other unforeseen circumstances to serve as triggering events.
Once a triggering event has occurred, it is then necessary for that event to impact the ability of the parties to perform some of their obligations under the contract. The mere occurrence of an enumerated event in a force majeure clause does not excuse performance – the occurrence must somehow impair performance or render performance impossible. See Audit Logistics LLC v. Johnson Cherry Creek, LLC dba Johnson Storage & Moving Co. 2017 Colo. Dist. LEXIS 641. If Covid-19 or related government actions (i.e. stay at home orders) did not impact a party’s ability to perform under the contract, then that party is not excused from its contractual obligations.
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If both a triggering event has occurred and it has impacted performance, performance may be excused or deferred. Further steps may need to be taken by the party, such as providing proper notice to other parties to the contract. If you need assistance analyzing force majeure clauses in contracts to determine their potential applicability, contact one of our business attorneys today.