Contracts, Coronavirus, and Crises

Last Wednesday, Gov. Baker declared a state of emergency due to the accelerating spread of the coronavirus COVID-19 throughout Massachusetts. As a result, schools, businesses, and various state agencies have closed their locations and encouraged their staff and constituents to stay home. In addition, various group events—workshops, classes, performances, sporting events, etc.—have been cancelled, postponed, or transitioned online. For many working artists, not only do these changes significantly reduce income, but they may also impact legal obligations under contract.

What is “Force Majeure?”

By now you’ve probably seen the words “force majeure” tossed around by a variety of sources, particularly in relation to the coronavirus outbreak. It’s a French phrase (we cribbed most of our legal lexicon from the French) meaning “superior force,” and it refers to extreme conditions beyond anyone’s control. Historically, practitioners have used “force majeure” interchangeably with “Acts of God.”

Practically speaking, force majeure is a principal of contract law excusing nonperformance or permitting termination of a contract due, again, to extreme conditions outside of either party’s control. You’ll often see it in the form of a term or section of a written agreement, otherwise known as a “force majeure clause.” Common force majeure clauses may include language like this:

"Force Majeure. If either party is unable to perform its obligations under the terms of this Agreement due to Acts of God, fire, flood, explosion, earthquake, or other natural forces, government mandate, war, civil unrest, acts of terrorism, accident, strike or labor disturbance, or other causes reasonably beyond its control, such party will not be liable for damages to the other for any damages resulting from such nonperformance or otherwise from such causes.

Again, the idea is to anticipate that sometimes unpredictable external conditions can make it impossible to perform under a contract. But no two force majeure clauses are the same—for example, you may see variations that include more industry-specific crises, such as a data breach, mechanical or hardware failure, embargo, etc. Different force majeure clauses may also grant different types of relief: the example above shields the parties from liability for nonperformance, but a different clause might permit early termination of the contract. The key is, if you have an agreement that includes a force majeure clause, review it carefully.

Is COVID-19 a Force Majeure Event?

The short answer is “maybe? It depends.” If your contract’s force majeure clause specifically includes pandemic, epidemic, viral outbreak, etc., then you’re in the clear. However, traditionally, illness doesn’t constitute a force majeure event or an “Act of God.” When interpreting contracts, when basic rules of language and construction fail, lawyers rely upon judicial opinions. Unfortunately, here in Massachusetts, we don’t have a ton of case law defining “Acts of God,” much less in relation to pandemics. Last winter, however, one federal court in Louisiana defined an “Act of God” as

a providential occurrence or extraordinary manifestation of the forces of nature, which could not have been foreseen and the effect thereof avoided by the exercise of reasonable prudence, diligence, and care, or by the use of those means, which the situation renders reasonable to employ.

Covey v. Seifert, No. 18-99-JWD-EWD, at *14 (M.D. La. Jan. 23, 2019) (quoting Saden v. Kirby, 660 So. 2d 423, 428 (La. 1995)).

In other words, according to this court, Acts of God boil down to a reasonableness standard: the event must be so extraordinary that you couldn’t have anticipated nor avoided it even by exercising reasonable care.

Unfortunately, we likely won’t really know whether COVID-19 constitutes a force majeure event until after the storm has passed and a court has been asked to rule on a breach of contract claim. However, the World Health Organization’s classification of the virus as a pandemic, the growing number of states declaring states of emergency, Gov. Baker’s prohibition on large gatherings, and the president’s declaring a national emergency, there’s ample support to suggest we’re dealing with something major.

What if My Contract Doesn’t Have a Force Majeure Clause?

Step one is to see if your contract has any other provisions permitting early termination without penalty and, ideally, without cause. Often these types of termination provisions have a notice requirement, but as with all contract terms, results may vary.

Otherwise, you might consider having a conversation with the other parties to your contract to come up with a plan moving forward. Can contract performance be postponed? In the case of workshops, seminars, classes, etc., is it something you can deliver remotely? Creative and successful solutions can often arise when parties come together to collaborate over meeting their respective needs.

If you’re an artist or with an arts organization affected by the coronavirus outbreak and need legal assistance, please contact the Volunteer Lawyers for the Arts of Massachusetts at VLA@artsandbusinesscouncil.org, and learn more about our lawyer referral service at https://artsandbusinesscouncil.org/volunteer-lawyers-for-the-arts/!

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