Search Site
Menu

How Will Coronavirus Affect Contractual Relationships and Obligations?

The coronavirus pandemic has disrupted practically every aspect of American life. Whether closed by government order or by concerns about public safety, millions of businesses around the country have seen their operations come to a halt. Despite the overwhelming effect of COVID-19, it is not a certainty that an “Act of God” clause in a business contract will enable a party to ignore its obligations under the agreement.

Many contracts include force majeure provisions that account for situations where an outside event prevents a signatory from fulfilling contractual duties. If you’re thinking of relying on this type of provision to justify nonperformance or if a party to an agreement is invoking a COVID-19-related Act of God clause against you, here are some factors to consider:

Terms of the agreement — As in any contract interpretation matter, it’s critical to examine the document to see if a pandemic is mentioned specifically or generally as an event that would affect the parties’ rights. For example, the collective bargaining agreement between the National Basketball Association and its players’ union specifically refers to “epidemics” as a force majeure event that allows the league’s owners to withhold salary and potentially revoke the entire agreement.

Impossibility vs. difficulty — Many unexpected things can drastically alter the feasibility of meeting one’s contractual obligations. However, just because something has become more difficult, economically impractical or even dangerous, that does not justify the use of an Act of God exception. Even in a relatively recent case involving a highly contagious disease, Morocco wasn’t able to invoke force majeure to escape liability after it canceled a 2015 soccer tournament while the Ebola virus afflicted West Africa. Though holding the tournament might have been unwise and costly, the Court of Arbitration for Sport ruled that it was not impossible.

Foreseeability — Another consideration when a party seeks to defend its nonperformance by claiming an Act of God is whether the circumstance was foreseeable. Financial downturns (even severe ones), shipping problems, material shortages and other situations affecting contract fulfillment are usually considered foreseeable. In fact, some agreements specifically exclude common problems that might lead a contract partner to invoke a force majeure clause.

The unique nature of the COVID-19 pandemic has thrust all of America into uncertainty. Counting on Act of God language to relieve you from your legal duties might not be a sure bet, even if you believe you have a compelling case. Taking prompt steps to communicate with contract partners might be a better way to reach a solution that acknowledges the harm that was done and modifies certain rights and obligations. By working with a skillful, creative business lawyer, you might be able to avoid a serious conflict over how force majeure is defined in your situation. If consensus cannot be reached, your attorney can advise whether you might succeed in a legal action.
Contact a business law attorney to schedule a meeting

Law Offices of Paul Chatzky counsels business clients on various legal concerns. Please call 847-416-1646 or contact the firm online to make an appointment for a consultation.

Paul Chatzky Attorney Photo
Paul Chatzky
Founder

Born in Havana, Cuba, Paul Chatzky is fluent in Spanish and English, enabling him to effectively represent a wider range of individuals and families. He is AV® Preeminent™ Peer Review Rated by Martindale-Hubbell®, and is listed among Illinois Super Lawyers, which is a reflection of his high ethical standards and exceptional legal knowledge. As a…

Deborah E. Chatzky Attorney Photo
Deborah E. Chatzky
Paralegal

Prior to joining the firm as a paralegal, Debbie was employed by major banking institutions as a loan processor and as an executive secretary. Debbie was also employed as an administrative assistant for the Board of Jewish Education. Having majored in Sociology, Debbie graduated from the University of Florida in 1980. Debbie completed her studies…

Client Reviews
  • lawyers
    5.0/5.0

    Paul Chatzky is well educated, knows in and outs in terms of law, keeps everything under control, responds to emails, returns phone calls almost immediately. Very professional and extremely detail-oriented lawyer. Highly recommended.

    Read more

    Client

  • lawyers
    5.0/5.0

    Mr. Chatzky is very responsive, ethical and effective. I’m extremely happy with the service and I would highly recommend this law office to anyone seeking legal help

    Read more

    Client

  • lawyers
    5.0/5.0

    Mr. Chatzky is truly superb at his job. His knowledge base is profound, and he approached my situation with honesty and integrity. I knew immediately that he had every intention to obtain the best outcome for me and that he had thought of every possi...

    Read more

    Client

  • lawyers
    5.0/5.0

    I highly recommend Paul Chatzky as a high capable and honest attorney who genuinely cares about his clients and is highly committed to supporting their best interests. He lived up to the high expectations that I had and was willing as hard as me to m...

    Read more

    Client

  • lawyers
    5.0/5.0

    Paul Chatzky is always very responsive, professional, and a pleasure to work with.

    Read more

    Client

See all reviews
AWARDS
Contact us

Quick Contact Form