Now that Coronavirus has been around for a while the affect to your business is most likely apparent. Events have been postponed or just plain cancelled. The outbreak of the COVID-19 pandemic has resulted in shutdowns worldwide.
The CDC continues to issue guidelines and provide updates with regard to are contract issues that may need to be addressed now. One that comes to mind right away is a wedding venue contract. This issue is already being dealt with by brides and grooms to be across the country. They are realizing that it is not so easy to get a refund.
What can you do if you find yourself in a contract that can’t be performed due to the pandemic? For example what you had a conference planned and the venue is now restricted due the lock down Orders? Indoor dining at the time of writing the legal article was prohibited.
Governor Phil Murphy today signed Executive Order No. 158, temporarily pausing the resumption of indoor dining, which had been scheduled to resume later this week. The Order also prohibits the consumption of food or beverages and smoking in the indoor premises of any retail, recreational, or entertainment business, including casinos, where masks are strictly required.
“Unfortunately, the spike in cases in numerous other states, compounded by instances of non-compliance in New Jersey, require us to hit pause on the restart of indoor dining indefinitely,” said Governor Murphy. “I recognize that there are many establishments whose owners, managers, and customers have been responsible, but we cannot move forward unless there is complete compliance. Throughout every step of our restart, we have been clear that we would not hesitate to hit pause to safeguard public health, and this is one of those times.”
What if one of your vendors can’t deliver on a contract due to restrictions included in a lock down order. What to do your company is holding a conference in a the near future can you get out of that hotel contract?
The answers to your question/s likely will be found within the contract/s you signed. Many contracts contain clauses which are not often needed to rely upon but are in the contract due to times in history which people realized very unforeseen circumstances do arise. These clauses are commonly referred to as “Act of God” or “Force Majeure” clauses. A “Force Majeure” clause may read something like this:
The performance of this Agreement by either party is subject to acts of God, war terrorism, government
regulation, disaster, fire, strikes, civil disorder, curtailment of transportation facilities, or other similar
cause beyond the control of the parties preventing or unreasonably delaying at least 25% of
meeting/convention attendees and guests from appearing at Company’s meeting/convention or
otherwise making it inadvisable, illegal, impossible or commercially impractical to hold the
meeting/convention or provide the facility. This Agreement may be terminated, and/or specific
nonperformance of underperformance may be excused, without penalty or payment, for any one or
more of such reasons by written notice from one party to the other. If for any reason beyond the control
of the Company the facility shall not be available, or shall not be in acceptable condition, this
Agreement may be terminated without penalty by written notice from Company to Hotel.
There are other many other differently worded versions of this clause in circulation. You contract not have this clause whatsoever. Don’t lose hope if that is the case! There is always an argument to be made on your behalf with some good lawyering.
A lot of American businesses are experiencing supply disruptions from factories in China, in early as February 11, 2020, over 100 Chinese companies already sought certification from the Chinese government under Chinese law that the epidemic qualified as a Force Majeure event. These same clauses will be used by companies here in the U.S. once suppliers and customers experience the same disruptions.
As a business owner now is the time to audit contracts for a proper Force Majeure or Act of God clause? Questions to ask are does your contract cover you in the case of government action or pandemics? Do you foresee a disruption to your business as result of a government “stay at home” order, and does your contract have a notification requirement?
How about on the consumer side of a contract? Have you booked a block of rooms at a resort hotel for your wedding party? Guests are now spooked with health concerns due to the virus and no longer can or will travel? Can you get your deposit back?
If you have questions about your contracts and how to deal with them in light of the pandemic, the attorneys at Riviere Advocacy Group can advise you. Contact us for a consultation with an experienced attorney.