While contracts and what constitutes a breach of contract may seem clear [see A Contract is a Contract: It’s Not So Simple in a Covid-19 World], the Covid-19 pandemic has tended breach of contract rather murky in some cases.
In other words, “A contract is a contract” may not always be the case.
Exceptions exist, and they may affect any type of contract from purchasing goods and services to employment agreements.
Here are a few examples of when a contract may not be enforceable.
A Force Majeure Provision
A force majeure provision protects each party in a contract from events that are considered to be well beyond the reasonable risk of doing business.
Such a provision excuses the performance of contractual obligations if circumstances such as fires, floods, tornadoes, acts of terrorism or other unforeseeable events beyond a party’s control prevent that party from performing as agreed in the contract.
Obviously, Covid-19 and the widespread economic and societal effects it has inflicted on the world could fall under a force majeure provision.
Impracticability or Impossibility of Performance
Situations can arise where changes in the law, the death or serious illness of a person needed to perform an essential act included in the contract or similar occurrence beyond either party’s control can lead to the “impossibility defense.”
In effect, if neither party could have anticipated such an event would happen, continuing to perform the contractual obligations are no longer feasible and if the party using the impossibility defense did not agree to continue to perform the contract’s obligations, then that party may be protected by the impracticability or impossibility of performance doctrine.
Prevention Due to Government Regulation or Order
This principle excuses or reduces a party’s contractual obligations due to unforeseen changes in regulations or government orders, often in emergency situations.
For example, you purchased a new living room set from a furniture store and contracted with the store to deliver the set to your home. However, the governor of your state shut down all furniture stores to curb the rise in Covid-19 infections.
In such a case, the furniture store could successfully cite that unforeseen order as the reason it had to breach the contract. However, the store may be obligated to deliver the set to your home after the state shutdown ends. Or the store may be required to return your deposit or payment.
Frustration Of Purpose
Frustration of purpose relieves a party in a contract when their initial purpose is significantly limited through no fault of its own.
For example, your event management company may hire a large group of temporary staff to serve a large industry conference, erecting displays, serving food, installing computers/workstations, etc. But the pandemic severely reduced attendance, which meant the event was drastically reduced in size and scope, postponed or cancelled.
In this case, under the doctrine of frustration of purpose, you might not be obligated to pay those employees.
Breach Of Contract & COVID-19
The Covid-19 pandemic has disrupted virtually all aspects of the U.S. economy and that disruption has extended into common contractual situations.
Certainly, while state laws vary to some degree, all include provisions protecting parties in contracts from both breach of contract under some circumstances.
These laws can be both nuanced and complex; it is important to consult with an attorney experienced in contract law to help you evaluate your specific situation.
The attorneys of the Law Office of Richard S. Cornfeld have experience in a broad range of contract issues in Missouri and Illinois. Contact us today for a free consultation if you feel a contract has been violated.