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Defenses to Contract Performance in the Coronavirus Era: Force Majeure

No business, neither big nor small, has proven to be immune to the rapidly increasing threat of the coronavirus (COVID-19) that has significantly disrupted commercial operations all over the globe. In response to this pandemic, public and private enterprises have implemented procedures to slow the spread of the coronavirus, including closing facilities and ceasing operations. As a result, businesses are now evaluating their options concerning performance of their contracts. Accordingly, it is critical for these businesses to be aware of the various defenses available to potentially excuse nonperformance of their contractual obligations in these uncertain times. One of these defenses is to invoke a force majeure clause contained in a contract.

A force majeure clause in Florida is a standard contractual clause that permits parties to allocate the risk of loss if performance becomes impossible or impracticable due to “force majeure events,” such as acts of God, hurricanes, earthquakes, epidemics, terrorism, government acts, labor strikes, and lock-outs, among other things. The Florida Supreme Court, in holding that a hurricane constituted and act of God excusing a party’s performance under a contract, defined such an act as follows:

An act of God, such as will excuse nonperformance of a legal contract, must be an act or occurrence so extraordinary and unprecedented that human foresight could not foresee or guard against it, and the effect of which could not be prevented or avoid by the exercise of reasonable prudence, diligence, and care or by the use of those means which the situation of the party renders it reasonable that he should employ.[1]

Other courts analyzing the effects of force majeure events and the application of force majeure clauses to the performance of contractual obligations under Florida law have provided guidance that is highly relevant for any person or business seeking to excuse nonperformance of their contracts. In a recent case, a defendant lessee attempted to invoke a force majeure clause in a lease agreement to excuse nonperformance of its obligation to pay rent based upon the Centers for Medicare and Medicaid Services’ (“CMS”) modification of a government program that significantly decreased the defendant’s revenue.[2] In its analysis, the United States District Court for the Southern District of Florida stated that “[f]orce majeure clauses are typically narrowly construed, and will generally only excuse a party’s nonperformance if the event that caused the party’s nonperformance is specifically identified.”[3] Although the lease agreement specifically listed “government action” when defining a “force majeure event,” the district court rejected the defendant’s force majeure defense because the subject clause only excused a party’s nonperformance if the “Event of Default resulted from a Force Majeure Event,” and the defendant failed to prove that its failure to pay rent specifically resulted from the CMS’ modification of the program.[4] Nevertheless, the district court noted, and several courts in Florida have previously held that, performance does not have to be rendered impossible for a force majeure clause to be enforceable to excuse timely performance under a contract.[5]

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[1] Florida Power Corp. v. City of Tallahassee, 18 So. 2d 671, 675 (Fla. 1944).
[2] ARHC NVWELFL01, LLC v. Chatsworth at Wellington Green, LLC, 2019 WL 4694146, at *1 (S.D. Fla. Feb. 5, 2019).
[3] Id. at *3.
[4] Id. at *4.
[5] Id.; see Stein v. Paradigm Mirasol, LLC, 586 F.3d 849, 857 (11th Cir. 2009) (“[F]orce majeure clauses broader than the scope of impossibility are enforceable under Florida law”); Devco Dev. Corp. v. Hooker Homes, Inc., 518 So. 2d

In the face of extreme adversity, businesses have demonstrated incredible resilience to keep up productivity despite the rapid spread of the coronavirus. As the world attempts to return to normal, it is important to understand your rights to ensure you are prepared for what lies ahead. It is undeniable that the coronavirus could qualify as a “force majeure” event that has caused disruption to business operations and contract performance all over the world. However, as demonstrated by the case above, a party’s ability to invoke a force majeure clause to excuse nonperformance of a contractual obligation based upon the coronavirus is a fact intensive inquiry that will be determined by the specific language of the contract at issue, among other factors. Therefore, if you are located in Florida and are seeking to determine whether you may excuse contractual nonperformance based upon force majeure or any of the other defenses available under Florida law, be sure you have the maximum protection possible by retaining the skilled commercial litigation attorneys at Stok Kon + Braverman.

For further information and guidance regarding your particular situation as it relates to the doctrine of Force Majeure and how it relates to your business or personal circumstance contact the lawyers at Stok Kon + Braverman online at www.stoklaw.com or by telephone at (954) 237-1777 to schedule your consultation.

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