When It Comes to Contracts, Is Coronavirus a 'Force Majeure'?
Summary: Dealing with the current situation is hard enough on ourselves and our loved ones. But what if you entered into a contract, or are a landlord or tenant facing difficult uncertain times? Can you get out of the contract? Can your tenant? Can a seller or buyer? The question is, when It Comes to Contracts, is Coronavirus a 'Force Majeure'?
Force Majeure typically refers to an "Act of God" such as a hurricane, terrorrism or other act, outside the control of the person, that prohibits the person legally bound under the contract to perform. Is the COVID-19 pandemic, legally speaking, an "act of God"? Here's a look at how Florida Courts may rule on real estate disputes that arise from transactions during this unprecedented time.
If intending to invoke a "force majeure" clause, a party is required to show a very specific and compelling reason why they can’t perform, as opposed to a more general sense that times are uncertain.
Since this is a first in history, and very new, it is a complicated question to answer. However, though not exactly on point, there is not an abundance of legal precedence to predict how Florida Courts may rule on disputes that arise from transactions during this time.
First of all, what is written into the contract does hold a lot of weight. If, for example, the Far/Bar As Is Residential Contract for Sale and Purchase or Residential Lease contains a force majeure clause, then that will control.
As written in the As Is Contract: Section 18(G) Force Majeure. Buyer or Seller shall not be required to perform any obligation under this Contract or be liable to each other for damages so long as performance or non-performance of the obligation, or the availability of services, insurance or required approvals essential to Closing, is disrupted, delayed, caused or prevented by Force Majeure. “Force Majeure” means: hurricanes, floods, extreme weather, earthquakes, fire, or other acts of God, unusual transportation delays, or wars, insurrections, or acts of terrorism, which, by exercise of reasonable diligent effort, the non-performing party is unable in whole or in part to prevent or overcome. All time periods, including Closing Date, will be extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under this Contract, provided, however, if such Force Majeure continues to prevent performance under this Contract more than 30 days beyond Closing Date, then either party may terminate this Contract by delivering written notice to the other and the Deposit shall be refunded to Buyer, thereby releasing Buyer and Seller from all further obligations under this Contract.
What does this clause do?
It provides an automatic extension that comes into play when a dramatic event prevents a party’s performance or closing from happening. It takes an unusual event to trigger this force majeure clause, as you can see from a few of the examples in the clause, such as hurricanes, acts of God, and acts of terrorism.
Once the clause is triggered, certain time periods (including the closing date, if applicable) will be extended for a reasonable time up to seven days after the force majeure no longer prevents performance. Parties should pay attention to the time in relation to the closing date, though, since either party may terminate the contract by delivering a written notice if force majeure continues to prevent performance more than 30 days beyond the closing date.
Are all force majeure clauses the same?
No.The specific terms can vary, which means every analysis must look at the specific words of the executed contract to see if they apply. It’s possible for the same exact facts to qualify for force majeure protection in one contract, but not another. For example, some force majeure clauses include epidemics and pandemics as covered events, while others do not.
Is the virus an “Act of God” as written in the clause above? Does this force majeure clause At this point, it is too novel and too new to tell. So frankly speaking, we don't know yet how the Courts will interpret it. apply to COVID-19 related issues?
Where does the Law Offices of Jacqueline A. Salcines PA Come In?
Myself and my team want you to know that we are here for you. Whether to interpret a contract, or the law, at the Law Offices of Jacqueline A. Salcines, PA we here virtually, to assist. In addition to reviewing contract for you virtually, we can initiate contact with the other party and send demand letters. We are open and here to serve the community. Call us 305 669 5280
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