Force Majeure as a Defense To Failure To Perform

With the advent of the pandemic, many businesses have found themselves financially strapped and having great difficulty paying their ongoing expenses. These include office space rent, leases on vehicles used in their businesses, contracts with independent service providers and the like. With reductions in revenue as a consequence of businesses and individuals not seeking products or services to extent that they were, particularly where the economy had for some time called for increased capabilities to provide such goods or services, these businesses are finding themselves in a particularly difficult position and are scrambling to find ways to avoid or even defer the contractual obligations that they have imposed upon themselves.

Many of these troubled businesses have looked to their attorneys for advice and information as to how it may be possible to achieve such deferrals or elimination of liability. The most likely place to find relief is in the contracts themselves, if they include a “force majeure” clause. These provisions, however, as they have been drawn in the past, are not likely to contain language which permits non-performance in the event of a global pandemic. Furthermore, as contracts are often written by the party being paid, or by the company that is providing the service as a part of their boilerplate rather than by the party getting the service, they often only protect the former. Therefore, in most cases the answer will be, “Sorry, we cannot find a way to relieve you of these obligations.”

This is a lesson for the future. If we can learn from our mistakes, perhaps we can succeed in including in our agreements, provisions that will protect us from these unforeseen and devastating events.

Recently, I was asked to review a commercial office space lease for a new business. The lease was a standard office lease with a force majeure clause that protected only the landlord. In this case, in addition to other major changes in the provisions of the lease, I was able to negotiate a force majeure clause that protected my client from liability if his business was forced to shut down due to a pandemic.

If you have any questions regarding any agreement that you have made or are about to make, please free to contact me.