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Enforcement Of Contracts In The Age Of The Coronavirus

Corporate & Business Law

4 minute read

In the age of the Coronavirus, a rarely invoked contractual term has risen dramatically in importance - Force Majeure. This rarely invoked contractual term can relieve either party of his/her obligation to perform under a contract as the result of an unforeseen and catastrophic event that is beyond the control of either party. Catastrophic events often are considered war, labor strikes, natural disasters, government work stoppages and pandemics (the Coronavirus). A Force Majeure clause is usually found along with other boilerplate clauses towards the end of a contract. It is worth a few minutes to review one's critical contracts in order to ascertain whether or not those contracts contain such a provision and, if so, whether the Force Majeure provision can and should be invoked under the current circumstances.

Absent a Force Majeure clause, a contract or certain of its terms may also be unenforceable under the legal theories of (i) frustration of purpose and (ii) impossibility as a result of the Coronavirus pandemic. Frustration of purpose is akin to Force Majeure. It is a legal principle that provides that a party to a contract may be excused from the contract when an unforeseen and unanticipated event occurs that was not brought about by either party which destroys the objective or purpose of the contract. Even if the parties are still technically able to perform, if the expected value or benefit of the performance is destroyed by an unanticipated event, the contract can be nullified, thus relieving the parties from their respective obligations under the contract.

Impossibility of performance occurs when an unanticipated circumstance or event arises that makes performance of the contract critically or vitally different from what had been originally and reasonably contemplated by the parties. If impossibility of performance comes into play, then a party may be excused from performing his or her obligations under the contract.

The Coronavirus has created a high degree of uncertainty as to the enforceability of contracts across the country. We now expect to see a large number of people and companies use this uncertainty to create a legal rational to relieve themselves of unwanted contracts.

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