The force majeure and act-of-god clauses in contractual agreements are one of the first places that a contractor may look for relief under its contracts in this age of the coronavirus. However, the pandemic may not meet the requirements of force majeure or act of god and might not relieve parties from contractual obligations.
“The Covid19 situation is an “act of god,” but not all “acts of god” excuse a party from its contractual obligations,” Kenneth Fields, a partner at Greenberg Glusker, told GlobeSt.com. “The threshold question is whether the particular act—in this case the COVID19 situation—actually prevents a party from performing its contractual obligations. If the answer to that question is no, then the analysis is over and the party must perform those obligations. If the answer to that question is yes, then the parties must review their contract to determine whether it includes such a provision and, if so, what obligations that provision might excuse, or if the contract does not contain such a provision, what obligations might be excused under applicable laws.”
There are also local and state laws regarding acts of god in contracts. The contractor should discuss the law that applies to its contract with an attorney.
Florida courts have not said much about these sort of clauses. Last year, a Florida federal court considering a force majeure clause noted that they are to be narrowly construed, meaning that a court should limit these clauses’ application as much as supported by the language of the provision. The same court also noted that force majeure clauses will excuse a party’s performance only for events specifically identified in the provision. Fittingly, the court also said that “[p]recedent on the enforcement of force majeure clauses is limited in Florida.”
Many force majeure clauses include “epidemic” or “pandemic” as qualifying events. To our knowledge, there are no Florida cases addressing a force majeure clause in the context of an epidemic or pandemic, though this may change because of COVID-19.
Under Florida law, a party seeking to invoke a force majeure clause must show that the force majeure event was unforeseeable, and that the force majeure event occurred outside the party’s control. This means that the claiming party must show that the event could not have been prevented or overcome, and there additionally cannot be any fault or negligence on the part of the claiming party.
If a party is unable to successfully utilize a force majeure clause to excuse performance during the coronavirus outbreak, or if a contract does not contain a force majeure clause, other options may still potentially be available to excuse performance, such as the defenses of impossibility and impracticability. The Restatement (Second) of Contracts defines impossibility as “not only strict impossibility but impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved.”
The doctrine of impossibility of performance applies when uncontrollable circumstances have made the contract impossible or impracticable to carry out. Impracticable is defined as something that can only be done at an excessive and unreasonable cost. “Under Florida contract law, the defense of ‘impossibility’ may be asserted in situations ‘where purposes for which the contract was made, have, on one side become impossible to perform.’”
Where the contractor’s work is not completely prevented from being performed, it may be able can bring another legal issue called frustration into the case. Frustration occurs when the overall purpose of a contract is negated or frustrated. This means that work might be able to continue but doing so would not truly benefit either party in the contract.
Clearly, a careful analysis with the input of your construction expert is in order. There may be a solution available in either your contract or under the facts. Don’t lose the opportunity.