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COVID-19: Is our business still liable under contract?!



Step 1 -- DOES YOUR CONTRACT HAVE AFORCE MAJEURECLAUSE!

A force majeure clause is a contractual provision allowing a party to delay or even avoid performing when circumstances outside the control of a party (e.g. state of emergency and/or pandemic) occur. Because such clauses are rarely, if ever, used, they are added as boilerplate language in contracts without much consideration. However, under existing New Jersey case law, force majeure clauses are construed rather narrowly, and need to be examined closely and on a case-by-case basis for viability.


Step 2 -- If the contract does not have a force majeure provision, contractual liability still may be avoided under the legal doctrines of impossibility or frustration of purpose ! The doctrine of impossibility is just that, a party does not have to perform because performance has become impossible, or at least absurdly difficult, because of the occurrence of an event (i.e. pandemic) that was not considered at the time of contracting. Frustration of purpose means that a party can still perform, however, an intervening event (again i.e. pandemic) fundamentally changed the nature of the contractual bargain. Again, New Jersey construes these theories of avoiding liability narrowly, so each contract and the surrounding circumstances must be closely examined.


Moreover, if you enter into a contract during the pendency of the COVID-19 pandemic, it will likely be difficult to argue that the pandemic created a force majeure, impossibility, or frustration of purpose scenario. As such, specific language is needed to ensure that worsening conditions will still allow for contractual avoidance, if desired.


If you have questions regarding contractual liability during the COVID-19 pandemic, remember, we continue to operate remotely. As always, we are just a phone call, Zoom conference, or email away!

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