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Coronavirus - Does Force Majeure Apply?

March 05, 2020

By: Emmett Egger, Daniel McIntosh & Michael Gibbons

The coronavirus has disrupted the economy and business activity, making it difficult or challenging for some parties to honor their contractual obligations. In fact, it is apparent that parties are terminating their obligations under agreements, e.g. cancelling event or hotel reservations. Additionally, the coronavirus is anticipated to negatively impact supply chain systems leading to delay or failure to deliver. Parties finding it difficult or challenging to satisfy their contractual obligations may seek a remedy: declare force majeure.

Force Majeure (meaning superior force) is a clause often found in agreements and is in some states provided for in a statute. As a remedy, a force majeure clause can be particularly helpful. Generally, a force majeure clause excuses a party from performing its contractual obligations if certain events occur beyond the party’s control that prevented or hindered the party from performing under the contract. Although the preceding sentence illustrates the general rule, whether a party can successfully rely on force majeure as an excuse for non-performance is dependent on the specific language used in the agreement and provided for in state law. This is because (i) a force majeure clause defines what events are out of the party’s control and (ii) state courts interpret and in some cases invalidate force majeure clauses. 

Since declaring force majeure is agreement specific, a party should review the force majeure clause in its agreement to determine if the coronavirus falls within the definition of an event beyond the party’s control. For example, if the force majeure provision states that an epidemic or disease is an event beyond the party’s control, then the coronavirus may fall within that definition. Additionally, state law may illuminate how the courts will interpret a specific force majeure clause. Florida courts, for instance, have upheld force majeure clauses and excused a party’s performance for events that are either (i) unforeseeable or (ii) foreseeable as long as the event was beyond the party’s control. As such, a detailed analysis of the agreement and state law will be particularly important, especially when parties seek to terminate contractual obligations or delay the delivery of supplies.   

Claiming a defense to one’s contractual obligations based on force majeure, however, does not come without risks. If a party improperly declares force majeure, such party may be in default and responsible for payment of damages to the non-defaulting party. The non-defaulting party may also be able to terminate the contract. These risks may dissuade parties from declaring force majeure. 

Given the significant consequences of improperly declaring force majeure, we encourage you to seek out a lawyer to analyze your agreement and evaluate the relative weight of the legal risks and rewards. 

For up-to-date news please follow our Coronavirus (COVID-19) Response Team page.


This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.
Emmett

Emmett Egger focuses his practice on assisting clients with acquiring, developing, financing and leasing commercial real estate assets, including multifamily, office buildings, condominiums, shopping centers, hospitality and leisure assets, and senior living facilities. He has experience with a wide range of complex commercial real estate transactions, including real estate portfolio deals and sale-leaseback transactions. He has also represented property owners and management companies in commercial landlord-tenant disputes.

A tennis player from a very young age, Emmett served as captain of the men’s tennis team at the University of Washington and qualified to play in all four junior majors (Australian, French, Wimbledon, and U.S. Open). Utilizing the discipline, focus and determination that he cultivated as a competitive athlete, he provides timely and high-quality legal solutions for clients faced with a variety of complex real estate acquisition, development, finance and commercial leasing issues.

Emmett serves as chair of the Orange County Bar Association’s Real Property Committee. He is also a member of the Orange County Teen Court Advisory Board and the Victim Service Center of Central Florida Young Professional Board.

Still an avid tennis player, Emmett also enjoys sports, hiking, fishing and the great outdoors.

Daniel

Destined to become a lawyer, Dan is a Central Florida native surrounded by more than a handful of lawyers among his relatives – including his dad who was the City Attorney for a number of Central Florida cities and public entities, siblings, cousins, in-laws, and even children. But first Dan wanted to explore the ski slopes of the “wild west” after attending Duke University and before returning to his southern roots to attend the University of Florida Law School. While in college, Dan worked in high-end retail and as a rodman on a survey crew. With this surveying experience behind him, Dan ultimately found his passion in real estate law.

With a focus on business trends, Dan has successfully guided some of the most recognizable Central Florida companies through multi-site, multi-jurisdictional real estate acquisitions, financings, and dispositions. He advises clients on acquisition, leasing and financing, title review and survey analysis, environmental issues and zoning, with attention to every detail of these transactions – from document preparation, review of title commitments, endorsements and coverages, surveys, and closing statements, and all the negotiating and documentation in between. Clients include owners and lenders of shopping centers, retail stores, restaurants, gasoline and convenience stores, golf courses, ski resorts, hotels, and condominium properties.

In addition, Dan has negotiated and closed hundreds of high end residential transactions on sites throughout the southeast.

As a real estate leader in the firm, Dan’s mission has included building and mentoring efficient teams committed to the clients’ business success, echoed in his commitment to his community. A resident of Winter Park for many years, Dan has served in leadership roles on many civic, church, and charitable boards. A graduate and long-time participant in the Winter Park Chamber of Commerce Leadership Program, Dan served as its alumni association president, wrote its initial by-laws, and was a recipient of its Winter Park Chamber of Commerce Community Leader Award. His leadership role on the Winter Park Library Board is helping to bring the City’s vision of a new library and events center to life in Martin Luther King Park. Dan is also a past president of the Orlando Shakespeare Theater and has been a member of its Board for over 20 years.

Michael

A LEED-certified attorney, Michael Gibbons represents owners, developers, contractors, design professionals and subcontractors asserting a variety of construction claims (and defenses to such claims), including actions for breach of contract, delay, latent defects, water intrusion and mold, differing site conditions, extra work, indemnity and warranty.


Michael also counsels clients on issues related to construction claims of lien and surety bond claims and regularly represents clients in litigation and arbitration over construction claims of lien and payment and performance bond claims. 

Formerly an Assistant State Attorney, Michael tried over 65 cases through verdict ranging from battery and DUI to Armed Robbery and Felony Murder. He has tried a variety of civil cases as well, and has substantial experience litigating ADA (Americans with Disabilities Act) cases in Federal Court under Title III of the ADA where accessibility to public accommodations is at issue.

In addition to litigating design and construction related claims, Michael often represents owners, developers, design professionals, general contractors, and sub-contractors in the preparation and negotiation of design and construction contracts. His experience litigating construction claims helps Michael identify problematic and unfavorable contract language. Conversely, his experience drafting and negotiating complex construction contracts makes Michael a more informed and knowledgeable litigator when a client needs a forceful advocate on a construction contract issue. A reasonable and clearly expressed allocation of commercial risks, rights and liabilities is essential to a good design or construction contract and critical for reducing the risk of later claims.

Accredited by the Green Building Certification Institute as a LEED (Leadership in Energy and Environmental Design) Green Associate, Michael is a frequent speaker and author on the subject of managing risks in sustainable design and construction contracts. He has significant experience drafting and negotiating design and construction contracts incorporating sustainability principles including LEED standards.

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