FORCE MAJEURE IN THE AGE OF COVID-19

The world may be roughly divided into two groups: those who recognize the term “Force Majeure” as a time-worn legal concept and those who have no clue about it. The former group is composed almost entirely of lawyers, while the latter is the rest of the world. Despite sounding like a Jean Claude Van Damme film, a force majeure is a cause, beyond the control of the parties, which prevents performance of a contractual obligation. It literally means “superior force.” These causes can range from directly preventing the party’s performance to indirect effects, such as disruption of supply chains.

            Many contracts contain force majeure clauses. Some are quite vague, but most contain detailed examples of causes excusing performance. These may include such things as acts of God, fires, insurrection, weather, earthquakes, labor disputes and supply chain interruptions. After the September 11, 2001 terrorist attacks, “terrorism” more frequently appeared in such clauses. With the current worldwide COVID-19 pandemic[1], issues will no doubt arise regarding whether force majeure clauses may be invoked. Future contract drafters are sure to specifically include health care emergencies, epidemics and pandemics in force majeure clauses.

            The National Basketball Association is currently considering invoking force majeure in its collective bargaining agreement with NBA players as grounds to reduce player pay.[2] The drafters of that agreement had the foresight to specifically mention “epidemics.[3]

“Force Majeure Event” shall mean the occurrence of any of the following events or conditions, provided that such event or condition either (i) makes it impossible for the NBA to perform its obligations under this Agreement, or (ii) frustrates the underlying purpose of this Agreement, or (iii) makes it economically impracticable for the NBA to perform its obligations under this Agreement: wars or war-like action … sabotage, terrorism or threats of sabotage or terrorism; explosions; epidemics; weather or natural disasters, including, but not limited to, fires, floods, droughts, hurricanes, tornados, storms or earthquakes; and any governmental order or action (civil or military); provided, however, that none of the foregoing enumerated events or conditions is within the reasonable control of the NBA or an NBA Team. (Emphasis added).

One can readily see the NBA’s argument: The COVID-19 pandemic is an event beyond the league’s control which has rendered its performance impossible or economically impracticable.

What about the contract which does not mention an epidemic or pandemic? As lawyers like to say, it depends—and what it depends on is the language at issue. Is this a “natural disaster?” Or does it fall within “governmental order[s] or action?” Seemingly subtle differences in drafting are often the difference between an answer and protracted litigation.

            Consider the NBA’s language, but omit “epidemics” from the clause. Does the contract still consider this to be a force majeure? Now, issues arise about whether COVID-19 falls within any of the “events or conditions” listed. Are the CDC recommendations on social distancing “governmental order[s] or action[s]?” These and other issues are certain to arise.

            Whether the clause covers a pandemic is only part of the analysis. The force majeure must also be the cause of the nonperformance. Some jurisdictions also require that it be unforeseeable. There have been other novel viruses, such as SARS and MERS—both coronaviruses. Is it unforeseeable that such a virus would impact contract performance?

            What of the contract without a force majeure clause? Many jurisdictions provide relief where contract performance is “impossible.” The applicable jurisdiction’s definition of “impossible” is crucial to the analysis. The contract’s choice of law provisions, if any, may be the deciding factor.

            Whether the COVID-19 pandemic excuses contract performance will be determined on a case-by-case basis. Contract language and the facts will determine whether and to what extent the pandemic excuses performance in particular cases.


[1] The World Health Organization has defined a pandemic as “the worldwide spread of a new disease.” https://www.who.int/csr/disease/swineflu/frequently_asked_questions/pandemic/en/

[2] https://sports.yahoo.com/report-nba-wants-players-to-take-50-percent-pay-cut-starting-this-month-214707167.html

[3] An epidemic is “[the] occurrence in a community or region of cases of an illness, specific health-related behaviour, or other health-related events clearly in excess of normal expectancy.” https://www.who.int/hac/about/definitions/en/