ImpossibilityĮven in the absence of a force majeure clause, New York law recognizes the common law doctrine of impossibility as an avenue to excuse performance when there have been extraordinary intervening events. That is especially true if, by that time, the coronavirus outbreak had already exacerbated into a public health crisis on a global scale.
If, for example, the contract was executed after COVID-19 was a known risk, the force majeure defense may be more difficult to establish. Whether the outbreak was foreseeable when the contract was signed may also be a factor in the analysis. In addition, affected parties should consider whether they can prove that the failure to perform was caused by the event, and whether they have exhausted reasonable alternatives to non-performance. For instance, clauses explicitly including events such as “epidemic,” “quarantine,” or “travel bans” may provide an avenue for a successful force majeure defense. 5Īccordingly, whether a party affected by the COVID-19 outbreak can successfully invoke force majeure will depend on whether the contract contains a force majeure clause, and whether the scope of the clause includes a relevant qualifying event or events.
Some courts have also required the invoking party to prove that the event was unforeseeable at the time the contract was entered. 4 In addition, even if a qualifying event has occurred under a force majeure clause, the party invoking the clause will bear the burden of proving the event caused its inability to perform under the contract, and that the party made reasonable efforts to avoid non-performance, but failed. 3 If the clause includes an open-ended list of qualifying events, such as examples of what would qualify, New York courts will confine application of the clause to events “of the same kind or nature” as the ones expressly mentioned. 2 For example, if the clause includes a list of specific qualifying events, New York courts will only excuse performance if one of those specific events has occurred. 1 Even if a contract does include such a clause, New York courts generally interpret it narrowly. Importantly, under New York law, force majeure generally cannot be asserted as a defense to a breach of contract claim unless a force majeure clause is expressly included in the contract, which would provide that a party is not liable if it is unable to perform its contractual obligations as a result of a force majeure event. Contracts often specify that such events include wars, riots, famine, travel bans, floods, strikes, earthquakes, or government requisitions. The doctrine of force majeure – a French phrase which translates to “superior force” – refers to contractual terms that excuse a party from performance should extraordinary events occur that are beyond either party’s control. We address those doctrines, and their potential relevance in the context of the COVID-19 crisis, below. New York law concepts such as force majeure, impossibility, and frustration of purpose have traditionally been employed when large-scale, unforeseeable events disrupt parties’ expectations about or ability to perform commercial contracts.
These responsive measures, in turn, have caused serious disruptions to business relationships and introduced significant uncertainty about risk allocation in pre-existing commercial contracts. Governments have taken increasingly aggressive responsive measures in an effort to contain outbreaks of the coronavirus, including implementing travel restrictions, quarantine measures, closing schools and businesses, and canceling large-scale events. Since first being identified in China in late 2019, the virus has spread rapidly throughout the globe, infecting over 100,000 individuals worldwide, with cases in over 100 countries and territories as of March 9, 2020. The rapidly evolving public health crisis caused by the novel coronavirus, also known as COVID-19, has dominated recent headlines.
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