Getting out of a contract during Coronavirus

April 2020

Is the Performance of Your Existing Contract Being Impacted by COVID-19?

 

With the global pandemic of Covid-19 spreading rapidly, much business activity has come to a halt. As a result, there is uncertainty surrounding the performance of many existing contracts. If you are a party to an existing contract that has been effected by regulation implemented in response to Covid-19, you should know your options regarding your performance.

 

First, review your contract. Does the contract include a Force Majeure clause? A Force Majeure clause may relieve a party from its contractual duties when its performance has been prevented by a force beyond its control or when the purpose of the contract has been frustrated. New York courts interpret Force Majeure clauses narrowly and will only excuse performance if the event was explicitly included in the contract and the event was unforeseeable. Thus, even if included in the contract, if the event is deemed by the court to be foreseeable, performance will not be excused.

 

If there is no Force Majeure clause in your contract, performance may still be excused based on the common law doctrine of impossibility. As with Force Majeure clauses, New York courts narrowly interpret the doctrine of impossibility. New York courts will excuse performance based on impossibility only when an unforeseeable event destroys the subject matter of the contract or the means of performance, making the contract objectively impossible to perform.

 

Determining whether your performance under an existing contract may be excused during this pandemic depends on the specific facts and circumstances in your particular matter. If you have an existing contract being impacted by COVID-19 you should speak to an attorney immediately.

 

J. Guadalupe, Esq.

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