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MSPs and force majeure clause - MSP Law
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Many contracts have a “force majeure” covenant that seek to relieve  parties’ from performing their obligations when circumstances exist that are beyond their control and which make the performance of their duties impossible. These extreme events are referred to as force majeure events.  For example, a flood, war, terrorist act, epidemic, earthquake, hurricane, government action, all of which can impact a parties ability to deliver services. Sometimes the clause will go broader and say something like “Acts beyond their reasonable control” or “Acts of God”

If the contract does not contain a force majeure clause, court will make decision on whether to excuse performance based on the foreseeability of the event. To provide certainty between the parties, they sometimes negotiate a force majeure clause.  This clause will allocate the risk of specified events regardless of their foreseeability.

You need to read your contract to see if your performance is excused and whether the shelter in place orders constitute a  force majeure event.  The provision is normally broken down into 4 distinct parts:

First, The clause typically starts with language excusing a party from performing the contract if specified force majeure events occur.  Second, it may list the force majeure events. Third, it may detail an obligation to notify.  Fourth, it may detail the remedies of the affected party and their obligation to mitigate, or limit, their damages.

Whether COVID-19 qualifies as a force majeure or an act of God under the contract will likely depend on the language of the contract and the specific manner in which COVID-19 effected the performance of the contract.  It will assist if a government entity issued an order preventing performance, equipment is involved and whether supply chain is delayed or unavailable; and if the personnel intended to deliver simply are unable to work because they are ill or subject to a quarantine or government issued “stay at home” order.

Even if your contract does not have a specific “force majeure” provision, there are potential excuses for performance.  Supervening events or events that occur following the execution of the contract  but prior to complete performance can excuse performance if you can demonstrate impossibility.  impracticability or a legal doctrine referred to as frustration of purpose.  In any case, the event has to without the fault of either party and the non-occurrence of the event was a basic assumption of the parties’ agreement.

For a party to succeed with the defense of impossibility, performance must really be impossible, not just financially difficult or without profit and  regardless of the efforts made.  Performance cannot be excused when the means of performing merely become expensive to maintain.

For a party to succeed with the defense of impracticability they have to demonstrate that performance, even with the supervening event, is materially changed and performance of the party’s obligations is substantially more difficult, complex or challenging.  The challenge must be  such that the material changes result in the excessive and unreasonable increase in performance costs. It is sometimes referred to as  “commercial impracticability,” meaning that a party’s cost of performance has increased to the point that performance would be commercially senseless. This defense does not get triggered if the supervening event merely renders performance more expensive. It has to be truly unduly burdensome and result in an increased cost of performing that materially changes the parties’ contractual relationship.

Frustration of purpose is a very limited excuse that applies when, as a result of the supervening event, a party’s principle purpose for entering into the transaction is completely without purpose. For example, performance is not impossible but one party’s reason for doing the transaction simply no longer exists. The parties’ contractual relationship, in this situation, is so materially different that the supervening event altered the inherent purpose behind one party’s performance obligations. While performance remains possible, a court may excuse one party from performance as it would no longer receive the expected value from the other party’s performance.