The coronavirus outbreak has had a profound effect on societies around the world.  Not only has COVID-19 impacted the physical health of Americans across the country, it has disrupted local, national, and global economies as well.  As entire industries have closed their doors and supply chains have been interrupted by delays and cancellations, many businesses are experiencing difficulty in fulfilling their financial obligations.

Is your ability to perform a contractual obligation beyond your control?

As a result of these complications, businesses must understand what rights, obligations, or relief may be available to them in their contracts and leases.  For example, a force majeure clause may excuse some or all of their obligations under their agreements.

What is the Force Majeure Clause?

Force majeure is a Latin phrase that translates to “superior force.” As a legal doctrine, a standard force majeure clause, sometimes referred to as the “act of God” clause, provides contracting parties with a way to deal with natural disasters.  When such an event impairs the ability to fulfill the obligations of your contracts or leases, force majeure clauses may excuse all or part of those obligations. Events that may trigger the clause include a war, hurricanes, fire, terrorist acts, and earthquakes.

Does Force Majeure protect the Tenant in a Commercial Lease?

COVID-19 has impacted landlord-tenant relationships and retail contracts to provide goods and services. In an effort to slow the spread of the virus, governments across the world have implemented different policies that restrict, reduce, or even ban participation in certain industries.  Pursuant to the “New York State on PAUSE” plan, all non-essential businesses were ordered to close indefinitely, eviction proceedings were temporarily halted, universities moved to online learning, and non-essential public gatherings of any size were prohibited.  Around the same time, the federal government enacted a travel ban throughout most of Europe, and blocked the export of critical medical gear such as N-95 respirators, surgical masks, and gloves.

All Commercial Leases are not created equal:

It is important to know what clauses your agreements contain to establish what your rights may be in dealing with the fallout from coronavirus. Even if a contract does not contain a force majeure clause, a similar concept known as the “doctrine of impossibility” may excuse certain obligations frustrated by COVID-19.  If you believe your business relationships or landlord-tenant agreements have been impacted by coronavirus, please feel free to reach out to Scott Bogucki at (716) 845-6446 or [email protected].

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