Lawyers all over the country are brushing up on a legal doctrine called Force Majeure. Why? Because it is the key lens for viewing deals disrupted by the pandemic. Since COVID-19 is disrupting almost all human interactions, Force Majeure and related doctrines are well worth examining. If you haven’t already, you’ll be hearing the phrase soon – and often.
When the Law names a concept or a doctrine, it usually resorts to Latin. You may have heard phrases like quid pro quo (“this for that”) or res ipsa loquitur (“the thing speaks for itself”) bandied about recently, for example. Force Majeure is French (“superior force”). So, there’s that.
What really makes Force Majeure interesting and not only for lawyers, though, is how aspects of the doctrine relate to our every-day approach in facing adversity. There are lessons for life in considering what matters here. (No, it’s not that hordes of readers are combing the Internet for posts on the law of Contracts. And no, what follows is not legal advice, obviously.) So, what is it?
The Concept
In ordering our affairs, we seek to hold each other, and ourselves, to doing what we promise to do. Courts are not pleased with those who breach contracts, and assess money damages for doing so. We value promise-keeping.
What happens, though, when an abnormal, outside event prevents one or both sides of an agreement from doing what they promised? That is, if a force superior to the parties’ intent intervenes? (Note: we’ll refer to this simply as the “event”. Also, to do what was promised is to “perform”.)
If someone has a contract with a town or a county to fix a road’s potholes (don’t we wish!) and an earthquake destroys the road, what happens to each side’s obligations? Or if one is hired to paint a barn that burns to the ground? The possibilities of events beyond the parties’ control (whether the cause be nature – floods, earthquakes – or mankind – terror attacks, war) are endless. The potential for complexity far exceeding these plain examples is limited only by the scope of our entanglements.
Sophisticated written contracts often contain Force Majeure clauses. In them, a parade of catastrophes is listed with some attempt to agree in advance who gets to skip, change, or delay performance – and under what circumstances. Some clauses include a catch-all provision to deal with events not mentioned.
After The Event
After the event occurs, if everyone agrees what should happen next, there’s no legal problem. (There are always the hardships and heartaches involved in picking up the pieces, unfortunately.) When the parties disagree, however, even after trying mediation, the courts ultimately must decide. Was the event a Force Majeure? If so, how does it affect what the parties promised to do?
If there is a contract with a Force Majeure clause, the court will interpret and enforce that language. As in many areas of law, state law will govern. While that means the law will vary some, certain kinds of issues generally will matter:
- If not completely unforeseen, the extent to which the event was unavoidable or not within the control of the parties
- Whether the event directly caused the inability to perform
- To what extent there was a true inability to perform
- Whether there were any attempts to perform
- If the doctrine applies, what the appropriate remedy should be
The burden of proof is on any party seeking to invoke Force Majeure. Obviously the cases will depend on their facts, but there’s no doubt that COVID-19 will present numerous, daunting legal problems.
When There Is No Force Majeure Clause
It is possible to have either (a) an enforceable contract that is verbal rather than written, or (b) a written contract that does not contain a Force Majeure clause. Either way, there may still be a remedy. To address this very briefly, two similar doctrines of law have evolved in our so-called “common law”, on a case-by-case basis.
Impracticability is not just impracticality with an extra syllable, so lawyers can have another word nobody else says. It means something is beyond simply not practical to do, even if not quite impossible. If impracticable, it can’t be put into practice under the circumstances. So, parties invoking the doctrine must show the event to have been beyond their control and destructive to one or more of the contract’s essential assumptions.
Then there is Frustration. This is not exactly what Muddy Waters was singing about in “I Can’t Be Satisfied”, later inspiring the Rolling Stones’ “(I Can’t Get No) Satisfaction”. It is frustration of purpose. So, again, if parties reach an agreement based on assuming certain things will or won’t happen, and an event not their fault later shatters their assumption(s), relief may be available. Was the purpose of the contract frustrated?
[For anyone wanting more detail on the three doctrines, a quick search will provide scads of information. Continuing Legal Education is going berserk with courses on all this – all webinars, to be sure.]
Digging Deeper Into What Matters
In the flood of litigation expected in the wake of COVID-19, courts will have much to consider. Whether there are Force Majeure clauses to interpret, or doctrines like impracticability or frustration to apply, judges will find themselves asking similar questions:
Was performance impossible, or so difficult that it might as well have been impossible? Or was it just annoying, inconvenient, or somewhat more difficult or costly than anticipated? How difficult is too difficult? Did the pandemic cause the impossibility in this case? Was it even relevant?
Did the parties act honestly and in good faith? Try to perform? Seek to limit the harm or avoid the negative consequences? Seek alternative solutions? Communicate?
Is there a way out of the situation that makes sense? Can justice be done? Is one side trying to take advantage? Is the event just an excuse to renege, or an attempt to renegotiate a deal one regrets? Should the contract simply be void? What if some sort of under-performance is possible, and better than nothing?
Equity and the Truly Superior Forces
Like anything else, the Law is not perfect. Limitations and imperfections exist, whether in statutes, common law, rules, or regulations. Inflexibility is therefore problematic. Up steps Equity, the conscience of the Law. Equity does not oppose the Law, but supplements it with an overriding concern for fairness and good sense. By the way, “Equity” (or “Chancery”) sometimes denotes a division in the court system where remedies other than money damages are sought. Equity’s principles or “maxims” are generally available to interweave with the Law, however.
Of all the old Equity maxims, my favorite is this: He who seeks Equity must do Equity. Wise words, those.
Honesty, fair dealing, good faith, reasonableness, decency, concern for the big picture – these are the kinds of things courts will be looking for in deciding Force Majeure (and related) cases. They’re also what we demand of ourselves and each other when we are at our best.
These are the truly superior forces.
The wise among us don’t wait for the courts to tell us so on a case-by-case basis. What the courts decide to do always carries tremendous significance, but is not as important as what we decide to do – every day, in matters large and small.
The current saying is “We’re all in this together.” In a sense that’s always true, not only during a pandemic and not just with respect to health. Behavior, good and bad, matters. Bad behavior harms not just the victim but the perpetrator as well, and then ripples through the community. The same is true for the benefits of the good.
Our system and our way of life depend upon our embrace of truly superior forces – among them honesty, fair dealing, good faith, reasonableness, decency, and concern for the big picture. Whether our being “all in this together” ends up a blessing or a curse depends on us.
Ken Bossong
© 2020 Kenneth J. Bossong