COVID-19 and Force Majeure Clauses
Written by Emily A. Cohan: [email protected]
There is much discussion recently about Force Majeure Clauses and COVID-19. Here is a little information. It is not intended or expected that any reader would use this summary information to make decisions.
A contract may include an express force majeure clause that can relieve a party from liability for non-performance or delayed performance due to a force majeure event. Georgia requires the language of a force majeure clause to clearly contemplate the force majeure event. Holder Const. v. Georgia Tech Facilities, Inc., 282 Ga. App. 796, 798 (2006). If the contract is silent on force majeure, the affected party must look to other principles to determine if it has an excuse for performance.
A contract does not have to include a force majeure clause in order to invoke the “act of God” defense. “Act of God” is defined in Georgia as both a contractual and statutory defense. O.C.G.A § 13-4-21 excuses performance that becomes impossible as a result of an act of God. Georgia statutorily defines an act of god to refer to an accident produced by physical causes which are irresistible or inevitable, such as:
- …. “Illness” (O.C.G.A § 1-3-3(3).)
This statutory defense requires that the act of god make performance impossible and requires the existence of an extraordinary event outside human agency. Sampson v. General Elec. Supply Corp., 78 Ga. App. 2 (1948). The term “act of God”, as used in the legal sense, protects a person against responsibility for nonperformance of contract only when events in nature are so extraordinary that history of climatic variations and other conditions in the particular locality affords no reasonable warning of them. Id.
Georgia case law is silent on whether the recent COVID-19 pandemic constitutes an act of god due to the recent nature of these events. Thus, this defense hinges upon interpretation of recent events by the courts and whether or not COVID was “irresistible and inevitable”.
An alternative concept may be frustration of purpose. This applies when, due to a supervening event, the impacted party’s main purpose for entering the transaction is destroyed or removed. The frustrated purpose is so much the basis of the contract that without it, the transaction makes little sense, although performance remains possible. This defense is only available if:
- The impacted party seeking to be excused can no longer accomplish its purpose for the transaction;
- Both parties knew of the impacted party’s principle purpose for entering into the contract; and
- A qualifying supervening event caused the frustration.
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