COVID-19 and Force Majeure

December 28, 2020

In light of the current COVID-19 pandemic, force majeure has taken on added importance.

Termination for cause/force majeure terms related to the pandemic are being added to contracts on a regular basis. The language in many is such:

RIGHTS OF TERMINATION FOR CAUSE

This Agreement may be terminated by either party without liability upon written notice under the following circumstances: if a party’s performance under this Agreement is subject to acts of God, war, government regulation, terrorism, disaster, strikes, civil disorder, a pandemic, a travel restriction issued by a governmental agency, curtailment of transportation facilities, or any other emergency of a comparable nature beyond the party’s control that in each case make it illegal or impossible to perform its obligations under this Agreement. In such event, the terminating party shall give written notice of termination to the other party within five (5) days of such occurrence.

Industry legal expert John Foster, Esq., CHME weighed in on this clause.

“I literally deleted one almost identical to this and replaced it with one I wrote. Pandemics are now included in every contract since COVID-19 appeared,” says Foster.

Here are his objections:

It is better than most, but still inadequate. It limits a force majeure event to “illegal or impossible.” That leaves the other standards available as a matter of case law: “Impracticable” and “frustration of purpose” of one of the parties.
It mentions travel restrictions but doesn’t mention group gatherings. (size limits or stay-at-home orders).
It states that the affected party must notify the other party within five (5) days of such occurrence. That’s confusing because COVID-19 hit the United States in December 2019 or January 2020 depending on who you believe. That means every party to a contract should have notified their counterpart of the occurrence back then.
It doesn’t make it clear if the meeting professional can claim a force majeure if the pandemic heavily exists in one or more cities from where attendees would be traveling from or through.
It isn’t clear the consequences of a venue not having enough space to accommodate the group while social distancing is a terminating event.
It doesn’t cover groups whose original intent and purpose was to meet face-to-face and be able to talk and discuss business without masks or other PPE.
It doesn’t cover government advisories against travel or group gatherings that aren’t the same as regulations.
It doesn’t excuse performance obligations and liability of the event sponsor in an attrition situation if the reason attrition occurs is due to a force majeure act or occurrence.
It doesn’t allow for the event planner to terminate if the force majeure act or occurrence is in affect a specified number of days (120-60) or less before the event.
The clause should explain the Purpose of the Event so that it is clear if a frustration of purpose has occurred.

Foster is an attorney, speaker, author and legal counsel whose firm Foster, Jensen & Gulley specializes in the legal aspects of meetings & conventions, trade shows & events, and association management. He can be reached at [email protected]