Force Majeure Impossibility
Across New Jersey and New York businesses and facilities are being shut down to prevent risk of exposure to the coronavirus (COVID-19), and to attempt to slow the virus’ spread. Both Governor Murphy and Governor Cuomo have issued Executive Orders shutting down all but “Essential” businesses. In light of this, certain contractual obligations are becoming impossible or impracticable to perform. In such a situation, it is important to understand whether either side to a contract can invoke a force majeure clause or whether the doctrine of impossibility or impracticability can excuse performance temporarily or even permanently.
Force Majeure Clauses
A force majeure clause is a contractual provision which excuses one or both parties’ performance obligations when circumstances arise which are beyond the parties’ control and make performance of the contract impractical or impossible.
Force majeure events typically enumerated in contracts include Acts of God, such as severe acts of nature or weather events including floods, fires, earthquakes, or hurricanes or Acts of governmental authorities such as changes in laws and regulations.
New Jersey and New York Courts will construe a force majeure clause consistent with the contractual terms, the surrounding circumstances, and the purpose of the contract. Meaning the determination of whether a force majeure clause can be invoked depends upon the facts surrounding the case and the specific language of a contract.
Doctrine of Impossibility or Impracticability of Performance
Even if a contract does not expressly provide that a party will be relieved of the duty to perform if an unforeseen condition arises that makes performance impracticable, a court may relieve a party of that duty if performance has unexpectedly become impracticable as a result of a supervening event under the doctrine of impossibility.
A successful defense of impossibility (or impracticability) of performance excuses a party from having to perform its contract obligations, where performance has become literally impossible, or at least inordinately more difficult, because of the occurrence of a supervening event that was not within the original contemplation of the contracting parties.
Conclusion
If you are seeking to evaluate whether you have the right to cancel a contract or you are seeking to enforce a Contract which a counterparty is seeking to cancel due to COVID -19 related issues, please contact us at 201-816-3733 or via email at the following email addresses:
Steven Davis at [email protected]
Albert Buzzetti at [email protected]