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The Coronavirus and Force Majeure Clauses in Contracts – SALCINESLAW

With the Coronavirus (COVID-19) taking over the country and businesses, businesses are now seeking to determine whether they are obligated to perform under their contracts, or whether they can invoke a force majeure clause to excuse performance temporarily or even permanently.

Force Majeure Clauses Generally

Not all contracts contain force majeure clauses and even if they dont, there are still protections afforded by law. The force majeure clause is a contractual provision which excuses one or both parties’ performance obligations when circumstances arise which are beyond the parties’ control and make performance of the contract impractical or impossible.[1]

Force majeure events typically enumerated in contracts include:

  1. acts of God, such as severe acts of nature or weather events including floods, fires, earthquakes, hurricanes, or explosions;
  2. war, acts of terrorism, and epidemics;
  3. acts of governmental authorities such as expropriation, condemnation, and changes in laws and regulations;
  4. strikes and labor disputes; and
  5. certain accidents.[2] Economic hardship typically is not enough to qualify as a force majeure event on its own.[3]

Determining whether a force majeure clause can be invoked depends on the specific language of a contract. Generally, force majeure clauses are confined to situations of the kind or nature which limit damages in a case where the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond the control of the parties.

State Specific Requirements for Force Majeure Clauses: Florida

The CDC defines an epidemic as an outbreak of disease that infects communities in one or more areas, and a pandemic is an epidemic which spreads across the globe. If a contract at issue lists epidemics or pandemics as a force majeure event, the claiming party could argue that the coronavirus qualifies in light of the fact that is has been officially declared a pandemic by World Health Organization.

If a force majeure clause does not list epidemic or pandemic as a triggering event, it is possible that the coronavirus could be covered as an act of governmental authority in some areas, given that many governments, including the United States government, have instituted lockdowns to prevent the spread of the coronavirus.

If a listed force majeure event occurs, however, there is still further analysis required to determine whether invocation will be successful.

Under Florida law, a party seeking to invoke a force majeure clause must show that the force majeure event was unforeseeable, and that the force majeure event occurred outside the party’s control. This means that the claiming party must show that the event could not have been prevented or overcome, and there additionally cannot be any fault or negligence on the part of the claiming party.

Some contracts additionally require that the claiming party give the other contractual parties notice before invoking a force majeure clause. If the claiming party does not give proper notice as set forth in the contract, it could preclude successful invocation of a force majeure clause.

Businesses seeking to invoke the force majeure clause of their contracts likely have a strong argument that the coronavirus outbreak is an unforeseen event, unless the parties entered into the contract after the outbreak of coronavirus. Whether businesses have also attempted to perform their contractual duties despite the coronavirus outbreak, and whether that is even required under a particular contract are questions that must be assessed on a case-by-case basis.

Other Options: Impossibility/Impracticability and Frustration of Purpose

If a party is unable to successfully utilize a force majeure clause to excuse performance during the coronavirus outbreak, or if a contract does not contain a force majeure clause, other options may still potentially be available to excuse performance, such as the defenses of impossibility and impracticability. The Uniform Commercial Code (UCC) provides that a seller is excused from performing under a contract when “performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.” The Restatement (Second) of Contracts defines impossibility as “not only strict impossibility but impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved.”

If a contract does not contain a force majeure clause, and an impossibility or impracticability defense fails, another possible defense for a party unable to fulfill its obligations under a contract due to the coronavirus is frustration of purpose. For the doctrine to apply, “the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense. ”Put differently, frustration of purpose occurs where “a change in circumstances makes one party’s performance virtually worthless to the other, frustrating his purpose in making the contract.” Business should be mindful, though, that economic hardship such as an increase in the cost of performing under a contract is not enough to assert a frustration of purpose defense.

Conclusion

The coronavirus is having a significant and harmful impact on businesses and their ability to perform under their contracts. However, whether a claiming party can successfully invoke a force majeure clause, an impossibility/impracticability defense, or a frustration of purpose defense in order to excuse performance due to the coronavirus is a fact intensive inquiry and must be assessed on a case-by-case basis. Contractual parties must look to the specific language of the contract, including the applicable law, to determine their likelihood of success.


At the Law Offices of Jacqueline A Salcines PA we are here to help. With over 21 years experience interpreting contracts and practicing business law. the best defense is to hire the right lawyer. Let our experience go to work for you. We can assist virtually, by phone, facetime or skype. Call or email us today.

TRUST | COMMITMENT | RESULTS

JACQUELINE A. SALCINES, ESQ.
706 S. DIXIE HIGHWAY 2ND FLOOR
CORAL GABLES, FL 33146
TEL 305.669.5280 EMAIL: J.SALCINES@SALCINESLAW.COM

FLORIDA REAL ESTATE ATTORNEY AND BUSINESS LAW ATTORNEYS

COVID-19 has caused many buyers to want to cancel contracts either dealing with real estate purchases, vessel purchases, materials or equipment. Many contracts in Florida contain a Force Majeure clause that permits closing dates to be extended, or even cancelled if there is an act of God, terrorism, hurricanes, accidents, storms or other events “beyond the Seller’s control” that do not permit the contract to go through or be completed.

Not all Force Majeure clauses are written the same. And not all Force Majeure clauses permit cancellation. Most allow for postponement or time periods to be extended, particularly closing dates, due to the inability to comply with the contract terms.

We are getting many calls daily to review contracts for buyers and sellers to interpret the Force Majeure clause in their particular contracts. If you need a contract reviewed, free of charge, the Law Offices of Jacqueline A. Salcines is here to help.

Call us, email us, Skype or Facetime. We are one phone call away and happy to help our community in this time of need.

TRUST | COMMITMENT | RESULTS

JACQUELINE A. SALCINES. ESQ.
305. 669. 5280
J.SALCINES@SALCINESLAW.COM

SOUTH FLORIDA REAL ESTATE LAWYERS

REAL ESTATE CONTRACT AND LEASE NEGOTIATION

A real estate contract is a legally binding document between two parties that binds the parties into certain terms and obligations.  Whether you are looking to buy, sell or lease residential or commercial property, you should always seek the services of an experienced real estate lawyer in Miami Dade County, to draft or negotiate a contract that addresses your particular needs.

Despite how important it is to have an attorney review your documents PRIOR to signing, many parties reach out to attorneys after they have already signed the real estate contract.  Buyers, sellers, tenants and landlords, whether residential or commercial, fail to contact a real estate attorney in Miami Dade County until the contract is already signed. Now, instead of giving advice as to how best protect the buyer, seller, tenant or landlord, we are usually being asked how can we now get them out of the problem.

At this point, a negotiation or litigation may become necessary in order to protect the buyers, sellers, landlord or tenants rights.  This is often a result of poor planning or the misconception that attorneys charge too much and therefore not feasible.  This is false.

On the contrary. It is less expensive to hire an attorney to draft a Residential Contract for Sale or Purchase or Residential Lease and represent you in the process, then it costs to hire one to then file or defend a litigation against you for nonperformance under the terms of the Real Estate Contract or Lease.

THE PROCESS OF NEGOTIATING A CONTRACT OR LEASE

By allowing an attorney to assist you to draft the contract, instead of just believing that all real estate contract and terms are standard in Florida, we can protect you every step of the way.  The best way to negotiate a contract is by hiring an experienced real estate lawyer in  Miami before entering into the transaction.  Even if you already hired a real estate attorney here is the basics to always consider when entering into a real estate contract:

  • Are the proper parties listed in the contract, with correct names
  • Are all the terms we spoke of addressed in the real estate contract or lease.  In Florida, only what is written, not the verbal or oral terms, will control the parties understanding.
  • Is the deal being financed?  If so, are the terms of the financing clear?
  • Who is going to hold the deposit?  Is the escrow agent a real estate lawyer who will not commingle the funds?
  • Is there a period of due diligence or inspections? Will you have enough time to hire a professional and obtain the report?

Always consult with a real estate attorney prior to entering into any real estate deal for purchase or landlord tenant residential lease.  A real estate attorney will analyze all options and bring our experience with prior issues we have encountered, to the table to protect you.

If you or anyone you k now is in need of legal assistance in a real estate contract or lease agreement in Miami Broward, Palm Beach or Monroe County, contact the Law Offices of Jacqueline Salcines today.

Attorney Salcines is:

  • A lawyer
  • An accountant
  • A realtor
  • A title agent

All these title in the real estate arena, for 17 years, allow us to put our experience to work for you.

Call us today for a free consultation. at  305.669.5280 and see how we can help you.


About the Author:

Jacqueline A. Salcines, Esq is the Owner and Managing Partner of the Law Offices of Jacqueline A. Salcines, P.A. Real Estate and Business Law Group. With over 17 years experience including holding a dual degree in Accounting, her broad knowledge of DEBT SETTLEMENT serves to aggressively protect and defend our firm’s clients.

Call us today to set up a  free consultation to discuss your specific needs. We are here for you!

Main office 305 | 669 | 5280. Or email the attorney directly: J.Salcines@Salcineslaw.com

TRUST |  COMMITMENT  | RESULTS

Jacqueline A. Salcines

Jacqueline A. Salcines

JACQUELINE A. SALCINES, ESQ.
706 S. DIXIE HIGHWAY
SECOND FLOOR
CORAL GABLES, FL 33146
TEL. 305 669 5280

Email:  J.Salcines@Salcineslaw.com