Modifying Contracts Due to Covid-19: Force Majeure Provisions

The coronavirus pandemic has affected nearly every aspect of our lives. In the context of business, pandemic-related concerns have called into question whether parties can safely or legally perform their contractual obligations. Many contractors have stopped work due to pandemic-related disruptions, leaving many to wonder whether they have legal recourse to demand performance or can assert defenses to avoid their obligations.

Parties may fear lawsuits or wonder whether they can recover damages for breach of contract due to COVID-19. Fortunately, force majeure clauses control contract disputes arising from unforeseen events in many cases. Virginia courts consider whether this principle applies based on the facts of each case and strive to resolve breach of contract claims relatively in such situations.

The laws surrounding the application of force majeure clauses have a long and complicated history. Still, our business lawyers in Virginia can help claimants understand their rights during coronavirus-related contract disputes. Discuss your concerns with the qualified Virginia force majeure attorneys at McClanahan Powers, PLLC today by calling (703) 520-1326 or contacting us online.

What Qualifies as a Force Majeure Event in Virginia?

The term force majeure refers to significant events outside the contracting parties’ ability to foresee and control that impact their ability to perform a contract. While parties are free to agree to specific terms that define qualifying events, some of the more common events that would likely trigger force majeure clauses include:

  • Terrorism, war, and riots
  • Civil disturbances, strikes, and protests
  • Major weather events such as fires, hurricanes, tornadoes, and earthquakes
  • Explosions
  • Epidemics
  • Overriding government actions and restrictions

Notably, epidemics and government actions – such as stay-at-home executive orders – generally qualify as unforeseeable occurrences sufficient to delay, cancel, or reform a contract. Parties may waive or shift the burden of specific force majeure events to one another or include contractual provisions addressing such events. However, not every contract contains such provisions. An attorney should review each agreement to determine whether default force majeure laws apply or the parties altered the law within the contract.

Applying Force Majeure Principles to Contracts without Act of God Provisions

Every state has specific laws interpreting and applying force majeure provisions and acts of God to contracts. For contracts controlled by Virginia law, illnesses often qualify as force majeure events even without written provisions addressing the matter. Even contracts that do not address unforeseeable circumstances, such as COVID-19, might be eligible for reformation or cancellation under broadly-written force majeure clauses.

To trigger a force majeure defense, either the coronavirus or an executive order must contribute to a party’s inability to perform. An act of God cannot prevent liability for breach of contract if a party could legally perform its contractual obligations without undue hazard. If the coronavirus directly or consequentially impacted a deal, courts typically reform arrangements as follows:

  • Excuse Delays – Courts will not cancel a contract against one party’s wishes if performance can wait. Judges generally excuse any penalties related to non-performance due to an act of God and permit the contract to pick up at a later time.
  • Reform & Modify Terms – Courts disfavor modifying contract terms, but it may do so if necessary to reach a fair result. Modifications may include permitting one party additional time to replace ill employees or contract with a new supplier.
  • Terminate the Contract – If the Coronavirus substantially frustrated the primary purpose of the agreement, judges may cancel the contract. Judges strive to put the parties back in the position they would have been had the contract never existed. Judicial orders may include demanding the return of a down payment or ordering partial payment for some services rendered. Courts may also consider any damages and liabilities incurred and distribute them equally between the contracting parties.

Contractors affected by COVID-19 may benefit from discussing contract mediation and reformation with a qualified Virginia business attorney. At McClanahan Powers, PLLC, we may help you avoid expensive litigation by helping negotiate a settlement that can prevent the need to court at all.

Interpreting Force Majeure Clauses in Written Contracts

Many public and professional contracts have specific provisions addressing what happens in the event of an unforeseeable act of God. The agreement need not use the legal terms or list a pandemic directly for courts to imply their meaning. Instead, parties may require performance at all costs or shift the burden of unforeseeable events to one another. While these clauses may seem to only apply to rare and unlikely occasions, they can significantly impact the rights of all parties involved.

Examples of language sufficient to overcome default common law principles of impossibility include demanding performance without excuse, in any event, or regardless of intervening circumstances. Some contracts have limited force majeure clauses addressing one or more specific events but excluding others; for example, military contracts may address war but not illnesses. Finally, some contracts require complete cancellation if an act of God occurs. This often means working together to return funds or pay for performed work.

Even if the unforeseeable burdens of COVID-19 were shifted to one party, exceptions exist when intervening laws or executive orders make performance illegal. Parties may address such claims in the contract. However, they may not typically claim damages for non-performance when the law substantially prevented implementation or the hazards made enforcement against public policy.

Our Virginia Business Lawyers Can Help You Navigate these Unprecedented Times

Most lawyers agree that the COVID-19 pandemic qualifies as an act of God sufficient to trigger standard force majeure clauses. At McClanahan Powers, PLLC, our dedicated Virginia and D.C. contract lawyers continuously monitor cases related to the coronavirus to assist our clients best. Discussing your legal rights and obligations under a contract now may save you future liability and protect you from a potentially dangerous work environment.

Despite the unprecedented nature of this pandemic, Virginia and D.C. contract law address epidemics and override executive orders even in the absence of force majeure provisions. Discuss your rights to reform or cancel a contract due to COVID-19 with McClanahan Powers today by calling (703) 520-1326 or scheduling a consultation online.

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