Early in the COVID-19 pandemic, we wrote about the legal concept of “force majeure” clauses found in some business contracts. A force majeure clause excuses a party from performing its obligations under a contract based upon some unforeseen and serious event such as a war, riot, insurrection, natural disaster, or other act of God. At that time, we suggested that over the course of the pandemic, more and more courts would be asked to relieve a party from having to honor its contractual obligations because the pandemic made it impossible or extremely impractical to uphold its end of a deal.
As predicted, many courts have now applied traditional force majeure clauses to the novel coronavirus pandemic and the following trend is starting to appear: in certain cases, courts have expressed a willingness to excuse parties from performing their agreements due to the pandemic if the parties’ contracts contain the right language. For example, if the force majeure clause specifically excuses performance due to a “pandemic,” then the analysis is straightforward and simple. If the pandemic did, in fact, prevent a party from delivering goods or fulfilling its obligations, then that party will be excused from performing. But, unsurprisingly, very few contracts written over the last several years will contain the term “pandemic” as a reason to excuse performance.
Therefore, parties have been seeking to use their existing contract language to argue that the COVID-19 pandemic fits within the scope of that language. In a very interesting case decided last month in New York federal court, a party successfully argued that the pandemic constitutes a “natural disaster,” such that it should have been excused from having to perform. The federal court agreed, noting that “it cannot be seriously disputed that the COVID-19 pandemic is a natural disaster.” This ruling is remarkable because when the attorneys who wrote the contract at issue typed “natural disaster” in that contract, they were most likely thinking of things like typhoons, earthquakes, and hurricanes, not a pandemic.
This decision underscores the importance of checking your contracts carefully and consulting with competent legal counsel who can pursue novel and creative arguments using the existing language in your contracts, even if you or your attorney had not anticipated the outbreak of a worldwide pandemic. It’s possible there is language in your contracts that can nonetheless help you. If you have questions or would like further information, please contact PLDO Partner Brian J. Lamoureux at 401-824-5155 or email firstname.lastname@example.org.
Disclaimer: This blog post is for informational purposes only. This blog is not legal advice and you should not use or rely on it as such. By reading this blog or our website, no attorney-client relationship is created. We do not provide legal advice to anyone except clients of the firm who have formally engaged us in writing to do so. This blog post may be considered attorney advertising in certain jurisdictions. The jurisdictions in which we practice license lawyers in the general practice of law, but do not license or certify any lawyer as an expert or specialist in any field of practice
A recently published article by the Harvard Law School Forum provides valuable insight to the multiple challenges being faced due to the pandemic. Although businesses have readily discussed the actions to be taken in the event of a pandemic, the scope of challenges faced resulting from the COVID-19 attack is unprecedented. As governing boards have discussed and analyzed the appropriate response to cyber issues, they are ongoing and creating stress from an operational and governance perspective.
The most significant change that has occurred during the past nine months is the new normal of remote working that has created a cultural upheaval to the workplace, in addition to placing a strain on the networks that support the activity. Many companies had a small percentage of their staff and managers working remotely; however, the surge in positive cases has significantly increased this percentage to maintain a safe environment.
Businesses have struggled to move the employees from an in-office environment to a virtual world. The potential for security breaches has dramatically increased due to employees working from home on shared computers vs. using a dedicated computer or laptop for business only that has the appropriate firewalls and other network protection that prevents cyberattacks.
According to a survey conducted by Deloitte & Touche LLP, the amount of cyber attacks during the pandemic have increased significantly and the types of attacks include phishing, online scams and disruptive malware, including ransomware and malicious domains. Budget cuts severely limit closely-held businesses from investing in the resources that are necessary to protect against these attacks.
In order for the challenges presented to companies and their boards to be addressed, it will be necessary for extreme vigilance to be the theme at meetings, and for boards to establish oversight committees with the expertise to develop mitigation plans that have built-in flexibility and efficiency to allow for rapid response should a breach occur. If you would like to learn more about data protection, cyber security strategies or other business matters, please contact Attorney Pannone at 401-824-5100 or email email@example.com.