"Force Majeure” and “Commercial Impossibility” Covid-19 Cases Likely to Balloon and Clog the Courts

This is the seventh in a series of blog posts about judicial systems’ response to the coronavirus outbreak (SARS-CoV-2 is its technical name; Covid-19 is the disease it causes)  and the justice systems’ active participation in a whole-of-society-approach (WOSA) to national security and safety threats such as Covid-19.

“Force majeure”  is a common clause in commercial contracts that essentially frees both parties from liability or obligation when an extraordinary event, circumstance, or irresistible force beyond the control of the parties,  such as the Covid-19 pandemic, prevents one or both parties from meeting their obligations under the contract.  In civil law, force majeure is sometimes referred to a “vis divina” or “the act of God.” Most force majeure provisions do not excuse a party's non-performance entirely, but only suspends it for the duration of the force majeure.

Cases Will Increase

There seems little doubt that contract cases invoking force majeure will increase exponentially as the pandemic spreads. In my inbox yesterday was an advertisement from Spilman Thomas & Battle, a law firm practicing in West Virginia, Pennsylvania, Virginia, and North Carolina, announcing that the firm has formed a “Covid-19 Task Force.” The announcement included an article written by attorney Travis A. Knobbe  on the contractual implications of Covid-19. In addition to a primer on force majeure, Kobbe notes that when contracts make no mention of the concept of force majeure, a business may be able to rely upon the doctrine of "commercial impossibility" -- often referred to by the statement “the thing cannot be done" -- for relief. “The entity operating a cruise ship that has a contractual obligation to port at a particular location for specific durations and at specific intervals has a very good ‘commercial impossibility’ argument to forgive its inability to perform in light of a pandemic,” writes Kobbe. “A party that has an obligation to deliver all hand sanitizers it produces to Kroger at a fixed price, however, likely cannot avail itself of this concept.”

A second advertisement from Spilman Thomas & Battle arrived this morning that included an article by attorney Eric E. Kinder,  COVID-19: Best Practices in the Workplace, outlining various strategies and policies  employers should consider implementing including: compliance  with the EEOC’s guidance regarding pandemics and the Americans with Disability Act (ADA); reducing the risk of workplace exposure to Covid-19; and changes to workplace policy. Kinder writes:

As employers make changes in the workplace, they must continue to be aware of applicable anti-discrimination laws, paying particular attention to ensuring that employees are not treated differently on the basis of race, country of national origin, or disability (actual or perceived). If an employer anticipates it may close facilities for a period of approximately six months or more, it should be cognizant of its obligations under the Worker Adjustment and Retraining Notification Act.

Will the Courts Be Able to Handle the Cases?

Whether force majeure and commercial impossibility cases will be able to be heard by courts anytime soon is questionable. Yesterday the Supreme Court of Virginia issued a “judicial emergency” at the request of the governor amid the coronavirus outbreak. It ordered suspension of all non-essential and non-emergency court proceedings in all circuit and district courts. Courts around the country are taking similar actions. The time schedules of the suspensions – until April 6 in Virginia and April 10 in West Virginia – are not aligned with the predictions that the Covid-19 pandemic is unlikely to subside until July or August of this year.

Copyright CourtMetrics 2020. All rights reserved.

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