The Force Majeure Clause in an Age of COVID-19
An often overlooked contract provision has now gained the spotlight in the wake of the COVID-19 pandemic. Parties to a contract are now considering whether a contractual force majeure (French for “superior force”) clause will play a critical role in determining whether or not performance is still required. Force majeure provisions typically consist of boilerplate language that generally excuse performance for “acts of God or other unforeseen circumstances that make performance impossible” but may also contain specific language identifying several events that could constitute a force majeure such as “acts of government,” “war,” “famine,” “hurricanes,” or “acts of terrorism.” Depending on the jurisdiction, not all force majeure provisions are created equal.
In order for force majeure to be applicable to a contract under Illinois law, the agreement must explicitly contain such a provision. If no provision exists, force majeure cannot be utilized as an excuse for non-performance. If a contract has a force majeure clause, depending on the jurisdiction, the party seeking to invoke the clause must typically demonstrate that the force majeure event was one of the events contemplated by the language of the provision, the event was unforeseeable at the time of contract, and that the event materially impacted, or rendered impossible, performance. Additionally, the affected party may be required to make a bona fide effort to perform under the contract and in doing so demonstrating that performance is impossible. Finally, if the force majeure clause contains a notice provision, it must be strictly complied with.
Even if a force majeure provision does not cover the COVID-19 pandemic, the parties to the contract may also have to contend with excused performance under Article 2 of the Uniform Commercial Code (for the sale of goods) or the common law doctrines of impossibility of performance or commercial frustration. Article 2 of the UCC codifies a form of force majeure for performance that 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.” Alternatively, the common law doctrines of impossibility of performance or commercial frustration require a fact intensive analysis. However, the commonality of both doctrines is a need for an unforeseeable event such as COVID-19.
If you have questions regarding how the COVID-19 crisis may impact contractual performance, please contact either Howard L. Teplinsky or Roenan Patt at (312) 368-0100 or any of Levin Ginsburg’s business attorneys.
