Is the COVID-19 Pandemic a Force Majeure Event?

With the World Health Organization declaring COVID-19 a pandemic on March 11, 2020, increased attention has focused on force majeure provisions in contracts. What is force majeure, and is COVID-19 covered under such provisions? What are potential remedies if COVID-19 falls within the definition of force majeure of a particular contract? Jose Maran, partner at Baker McKenzie and leader of the firm's Energy, Mining & Infrastructure Industry Group, explains.

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TRANSCRIPT

Joel Cohen: In December of 2019, a new coronavirus was discovered in Wuhan, China. In the weeks and months to follow, it spread around the globe, bringing with it illness and triggering dramatic government responses. Now, with global business disrupted, we'll take a look at if and when COVID-19 triggers a provision known as force majeure or act of god.

JC: Hi and welcome to TalksOnLaw, I'm Joel Cohen. As we discuss COVID-19 and force majeure, we are joined remotely by José Moran, a partner at Baker McKensie, where he leads that firm's energy, infrastructure, and mining industry practice group. Jose, welcome, and before we get started discussing the coronavirus and force majeure, let's get some background on what exactly force majeure means?

José Moran: The term "force majeure" also referred to as an act of god address the scenario when performing contract obligations become impossible, difficult, or onerous outside of either party's control.

JC: How would you apply that definition to COVID-19 or the government shutdowns to analysis when it would trigger a force majeure provision?

JM: Generally there are two approaches for contracts. The first approach is to have an open or non-exhaustive list of example events. Force majeure events that we have seen listed that would apply to COVID-19 include: an epidemic or pandemic, government action or intervention, quarantine, and a shortage of labor or materials. If there's one takeaway, it is to add pandemic or epidemic to future force majeure provision.

JC: Now sometimes these lists are open-ended and leave open the possibility for unforeseen events to be included within the force majeure provision. How are courts interpreting that?

JM: Parties must be cautious placing too much reliance on catch-all language or open-lists. New York courts, for example, construe force majeure provisions very narrowly. Under New York law, courts will find an event to be covered by a catch-all only if it's of the same nature and kind as the events that are specifically listed...