With no end date to California’s Stay at Home Order and countless businesses shut down indefinitely, many Los Angeles businesses are facing contractual obligations that simply cannot be executed. Products cannot be delivered and services cannot be performed across several industries. From travel, to supply chain issues, to bars and restaurants, gyms and salons, there are few, if any, businesses that remain unaffected by recent events.
Presented with pandemic-related complications and growing concerns over an ambiguous future, many businesses in California are wisely reassessing their contractual agreements to determine what relief may be available to them for resulting delays, disruptions or shutdowns. An experienced employment attorney in Los Angeles will be able to assist you with reviewing your contracts.
In many cases, a well-drafted contract will address the issue of non-performance specifically, typically in a force majeure clause.
What is a force majeure clause?
The term Force majeure translates to “superior force.” A force majeure clause in a business contract outlines the scope of unforeseeable events that might excuse nonperformance by a party, generally a narrow defense. If a business believes it cannot fulfill its contractual obligation due to the coronavirus epidemic, it must show that the event was beyond its control, the company is without fault or negligence, and that despite its skill, diligence, and good faith, performance became impossible or unreasonably expensive due to an unforeseen event.
Whether the COVID-19 pandemic constitutes a force majeure event will depend on the language of the contract. To assist in determining whether a force majeure provision may apply, examine its specific terms and determine which events are covered by the provision. For example, some contracts expressly exclude economic downturns as possible force majeure events.
Depending on the wording of the clause, if a force majeure event causes a party’s non-performance under the contract, that party may be entitled to temporarily suspend its performance obligations, to extend deadlines, or even to terminate the contract altogether.
Contractual force majeure provisions often contain special notice or timing provisions. Parties should examine their force majeure provisions to ensure that they are providing timely notice in the manner specified by the provision, such as personal service.
If you have questions about a particular clause in one of your business contracts, including a force majeure clause, contact the experienced employment attorney at the Law Offices of Eric A. Boyajian today.