Force Majeure Clauses and the Coronavirus

It seems to be everywhere and spreading further, this super contagious virus which originated in China earlier this year. And because it is already having an impact on the ability to timely obtain supplies and in some cases labor forces, it may be a good time to review that one relevant but not often analyzed construction contract provision – force majeure.

Many contracts have a time is of the essence requirement, generally combined with a costly liquidated damage assessment. Unless a delay is excusable, contractors are held to a specific time frame for completion, and if they miss that deadline, they’ll pay the price, a hefty price.

But one place contractors often find some relief in this regard is the force majeure clause – that contract provision which would allow one to explain away, and maybe excuse, any delay in performance based on the occurrence of circumstances beyond one’s control.

A contractor might therefore think that as long as he has some version of a force majeure clause in his contracts, then he is safe. Not really. Without more, such clauses may not be sufficient to forgive the lack of timely performance as many courts have generally interpreted them quite narrowly. And because the coronavirus is having different impacts depending on both where someone is and when someone is claiming the relief, that standard force majeure clause may not automatically generate the relief someone is seeking. This is because this virus and its effects are ever evolving.

A more careful look at the force majeure provisions in your existing contracts is surely in order – now more than ever. Start with defining the actual events that fall into this category – do they include acts, circumstances and developments that are and are not foreseeable and do they include all manner of medical crisis, catastrophe or epidemic? Do they require health emergencies of a certain nature and duration and does there have to be a public declaration suspending performance where your project is located? All of these elements matter.

As in so many things legal, one would do well to spell out as many details as possible. If a force majeure clause is to be all inclusive – incorporate both known and unknown circumstances, be they natural or man-made, and list all events that you want to be covered. Without those specifics you may not be excused from timely performance.