In the COVID-19 world of government-ordered shutdowns of nonessential trade and commerce, companies have found it impossible or impracticable to perform their contractual obligations, which will likely lead to a wave of breach of contract litigation. While the scale and nature of the COVID-19 pandemic appear to be unprecedented, this article highlights the principles courts have traditionally looked to in addressing claims that nonperformance of contracts should be excused because of external events.
Contractual Force Majeure Clause. Does the contract at issue include a force majeure clause? A force majeure clause “excuses nonperformance when events beyond the control of the parties prevent performance.” Harriscom Svenska, AB v. Harris, 3 F.3d 576, 580 (2d Cir. 1993). Force majeure clauses vary in their specific language, but typically list such events as strikes, boycotts, war, governmental laws or regulations and, often as a catch-all for unforeseen events, “acts of God.” If the contract does contain such a clause, it will determine the extent to which non-performance will be excused, subject to the standard rules of contract construction. Kel Kim v. Central Markets, 70 N.Y. 2d 900, 902-03 (1987) (“Ordinarily, only if the force majeure clause specifically includes the event that actually prevents a party’s performance will that party be excused.”).
