Does the coronavirus pandemic constitute a force majeure event under contracts with such a provision? If so, how does that impact each party's obligations under the contract?
Force majeure is a defense that permits a party to a contract to suspend or discontinue its performance of some or all of its contractual obligations. What constitutes a force majeure event involves a case-by-case analysis that focuses largely on the definition of force majeure in the applicable contract and the common law in the relevant jurisdiction. Generally, it refers to an event that is unforeseeable and/or beyond the control of the parties.
Many contracts define force majeure by reference to a litany of significant adverse events such as terrorism, riots, government or military order, labor strikes and acts of God. If the list of force majeure events includes a pandemic, epidemic, public health emergency or similar language, COVID-19 will likely constitute a force majeure thereunder. However, even absent such language, the COVID-19 pandemic is still reasonably likely to be deemed a force majeure event if the definition of force majeure event includes acts of God, national or global emergencies, governmental orders and/or material adverse events that are unforeseeable or beyond the parties' reasonable control, as is typically the case in most contracts. While the COVID-19 pandemic may qualify as a force majeure event, under some contracts in order to constitute a defense to contractual obligations, the event must also not have been (i) within the control of the claiming party, (ii) reasonably foreseeable, and/or (iii) preventable by the exercise of reasonable diligence by the claiming party.