Relief From Covid 19: Doctrine of Impossibility Force Majeure

We all find ourselves bound by contract conditions we are expected to pay or perform.  Covid 19 has taken the economy and world by virus storm. The workforce suffers devastation for income producers of all classes. The financial crisis was not caused by anyone’s laziness, general unemployability, or discrimination over age, gender, race, or sexual orientation.  The impact varies from person to person and occupation description. In some geographical areas, the governmental order is Shelter in Place and do not leave home. Restaurants, bars, shopping centers, and many related and unrelated businesses are ordered closed.  Undoubtedly, the prepayment on wedding Contracts may be temporarily lost and future sequential advance payments in doubt.  There are wonderful life-changing events which are cancelled. The expectation of a cruise on cruise ships for an anniversary or wedding is gone along with the arrival of the Covid 19 virus.

Is There Relief?

Force Majeure is defined as superior force or Act of God.  It relieves a party in part or full from performance.   This is also known as an unavoidable accident.  We propose that a cruise line is now during this time excused from performing a cruise wedding but not excused from refunding the charges collected. That may be a matter of rescission, for which there are separate and distinct legal elements. This must be an event outside of the control of those bound to the contract. This is typically a war, strike or unavoidable event. We propose that Covid 19 qualifies in many instances but not all instances. It must be an unforeseen event. It must be an overpowering event which precludes performance.  In one case a convention was cancelled in Hawaii based on the September 11, 2001 terrorist event but the Doctrine of Impossibility was not applied as the event was in Hawaii. This is controversial when included in a contract.  Force Majeure clauses can be implemented in specific contracts or events to avoid liability. The greater the magnitude of the event the more likely the implementation of Force Majeure as a defense to liability. It may include earthquake, hurricane, or we argue Covid 19.  Some contracts include a definition of Force Majeure.  If the innocent party is deprived of the benefit of the contract, such as a closed shopping center where the tenant does not have access, that may apply and excuse payment. There should be a physical restraint and not a matter of election. The reasonable fear of restraint is inadequate to employ the excuse of Force Majeure.  The party electing the defense of Force Majeure or Impossibility may only obtain relief from the contractual obligation when it must be from a condition or intervening event beyond an innocent party’s control.

The Doctrine of Contract Impossibility is commonly taught in law schools.  However, a similar concept Doctrine of Force Majeure is much less frequently referred to as an excuse for performing a contract.  We propose that each case is different but a cruise line may be excused from providing facilities for a wedding in March, April, and even May, of 2020 but the cruise line is not entitled to keep the payment and reschedule the wedding at its option.

The Florida Statute provision of the Uniform Commercial Code at 672.301 provides:

“If the performance of any part of this contract by seller or buyer is prevented, hindered or delayed by reason of any cause or causes beyond the control of seller or buyer, as the case may be, and which cannot be overcome by due diligence, the party affected shall be excused from such performance to the extent that it is necessarily prevented, hindered or delayed thereby, during the continuance of any such happening or event, and this contract shall be deemed suspended so long as and to the extent that any such cause prevents or delays its performance.”

This requires reasonable notice of a Force Majeure condition. There is such a wide scope of conditions that the Covid 19 lockout or governmental conditions can be included. A party that contracts absolutely and unqualifiedly to do something that is possible to be accomplished must make the promise good unless performance is rendered actually impossible by an Act of God, the law, or another party. Under Florida Contract law, the defense of impossibility may be asserted in situations where the purposes for which the contract was made have, on one side, become impossible to perform. Harvey v. Lake Buena Vista Resort LLC 568 F. Supp. 2nd 1354 ( M.D. Dist. Fla. 2008)  Neither developers nor purchasers are commonly given relief from a sales contract.  There is recovery from a hurricane. However, if property is destroyed in an earthquake then impossibility would likely protect both the seller and the purchaser.  Each factual scenario is to be separately evaluated.

Conclusion

The Doctrine of Impossibility of Performance should be employed with great caution if the relevant business risk was foreseeable from the inception of the agreement and could have been the subject of a provision of the agreement. In such cases, an inference arises that the party who naturally bears the risk, chose to assume it.  The defense of impossibility should always be raised from the inception with notice of impossibility. When raised that may enable either party to enjoy successful negotiation or resolution in favor of one party or another.

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Sutton Law Group

Sutton Law Group is a full-service, multidisciplinary law office serving clients in and around Miami, Florida. Established in 1985, we are trusted legal advisors and advocates in complex and even life-changing legal actions.

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