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Edward T. Kang, Kang Haggerty & Fetbroyt Edward T. Kang, Kang Haggerty & Fetbroyt

In light of the ongoing COVID-19 pandemic, businesses and individuals alike have struggled with following through on contracts that were agreed upon long before the novel coronavirus was even discovered, let alone foreseen as the cause of a worldwide health crisis. Many have now turned to the force majeure clauses present in their contracts—invoking the idea that the COVID-19 pandemic is an unforeseeable “act of God” that has hindered the ability of parties to perform their duties as agreed. For those who do not have such clauses present in their contracts, can the same concept be invoked in a court of law?

I note that even those who have force majeure clauses written into their contracts have faced an uphill battle in their exercise of the clauses. There has been a real debate over whether the circumstances generated by the coronavirus qualify as “acts of God” or are otherwise covered by force majeure clauses. In many situations, “disease”—which could be construed as including epidemics, pandemics, and so on—may not be explicitly included in the force majeure clause. To that end, many businesses have found out recently that their business interruption insurance explicitly excludes pandemics as a covered event, a relic from the early 2000s SARS outbreak. Even if disease is not clearly included, however, courts would be likely to interpret a “catch-all” type clause (e.g., language such as “but not limited to”) to also include pandemics. In a similar vein, acts of government can also be included in force majeure clauses, making certain government acts, such as the business closures we have seen nationwide, also a potential hindrance to the performance of contracts. Of course, those who argue that COVID-19 does not constitute an act of God are on the side trying to enforce the contracts—e.g., hotels that took deposits from consumers and are refusing to refund the deposits despite the travel restrictions due to the pandemic making the planned travels impossible.

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