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What NV and CA Businesses Should Know About COVID-19 and Force Majeure

COVID-19 has created contractual ripples that are rolling across the country and businesses should confirm their legal obligations before assuming they’re protected by a force majeure clause. Business owners should not make this assumption without first consulting with their attorney. In many instances, these clauses do not protect business owners against failure to perform contractual obligations in the midst of a pandemic.

Force Majeure

Does Coronavirus qualify as an “act of God”?  In most cases, Force Majeure would refer to hurricanes, tornadoes, floods, fires, etc. Most contracts allow parties to the contract to forego, postpone, or cancel contractual obligations when these events prevent them from fulfilling the terms of the contract.

However, most force majeure clauses are specific in their scope and the events that are covered. Because global pandemic wasn’t on the minds of most when these contracts were drawn up, there is a possibility that most businesses are not protected.

“Beyond Control”

For many business owners, the events of the past months were completely out of their control. To various degrees, governments across the country closed businesses and restricted commerce. This resulted in significant supply chain disruptions and other ripples that prohibited many businesses from providing services and products for suppliers, distributors, clients, and employees.

Indeed, there are justifiable arguments that these events were beyond control of business owners. However, for business owners with “beyond control” language in their contracts, they must demonstrate that these closures and surrounding events prohibited them from fulfilling their contractual obligations. 

Frustration of Purpose & Impossibility

If a business can’t claim protection under force majeure, it may be possible to apply the doctrine of frustration. Essentially, a business may be able to argue that the events were unforeseeable and uncontrollable, and created conditions that made it impossible for the business to fulfill their contractual obligations.

For example, if a supplier was unable to deliver certain critical components because of a factory shutdown thus preventing the business owner from completing and furnishing a finished product to a customer, this may be considered frustration. 

This is similar to the doctrines of impossibility and impracticability of performance. Because the shutdowns were ordered by city and state governments, businesses may be able to argue that a supervening prohibition by law prevented them from performing as agreed upon in the contract. However, it is important to understand that such provisions do not excuse non-performance based on changing economic circumstances or changes in market conditions.    

During these uncertain times, it is in the best interest of all parties to a contract to try to work together and do all that they can to satisfy their obligations under the contract in an attempt to avoid litigation.  However, if the parties are not able to reach an amicable resolution, it is important to consult an attorney.

What Our Clients Say

My family and I are thankful to Maddox, Segerblom and Canepa for their assistance during a three year case regarding construction defects to our home. We are truly appreciative of their knowledge, determination and assistance during this process. They were always courteous, and available to answer any and all of our concerns and questions. Thank you for the wonderful resolution. Many thanks to you and your staff.

Frances Castelli

We used Maddox, Segerblom & Canepa to represent us in a legal suit re problems in construction on new properties that we purchased from a developer.

We were very pleased with the representation provided by this law firm. They were fully communicative, responsive to our questions and were very knowledgeable about the issues that required resolution. Even after we reached a resolution, they have been responsive in making sure to point us in the right direction for help with repairs that are required.

We would recommend them to others with similar issues that require legal help.

Atam & Margo Lalchandani

Maddox, Segerblom & Canepa did a FANTASTIC job in our construction defects case. I interacted with several people from their office throughout our 2 year litigation. Their staff is friendly, knowledgeable and always prompt about getting back to you when you have questions/comments/concerns. I especially enjoyed working with Darcy, Ardea, Eva, and Sandra. Being part of a lawsuit is no fun for anyone, but if you have to be a part of one, I can’t say enough positive things about this firm!

Victoria Fox

The law firm of Maddox, Segerblom, and Canepa were amazing to work with. They were thorough and always available for any questions we had. We worked a lot with Sandy who was always professional, friendly, always on time for appointments and just a great person to represent this firm. We have never been involved in a law suit before and they made it comfortable for us. We appreciate the hard work the lawyers and people who work for the firm did and would recommend them.

Becky Loudenburg
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