As a result of the grave conditions faced by businesses due to COVID-19, parties to a contract may look to the contract to determine whether a delay or failure to perform is warranted under the circumstances. Specifically, the parties will look to a force majeure provision. A force majeure clause is defined as “a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.” Black’s Law Dictionary, 718 (9th ed. 2009). While force majeure clauses may have been seen as boilerplate language prior to the COVID-19 outbreak, they are more important now than ever.

Continue Reading Analysis of Force Majeure Under Alabama Law in the Wake of COVID-19

With the many projects impacted by COVID-19, now is the time to pull out your contract (contractors and project owners alike) and consider how the contract’s delay, time extension, or force majeure clauses and other legal theories allocate this unusual risk. An extended and more detailed version of this Alert can be found by clicking here.

Force majeure clauses allocate risk of natural and unavoidable catastrophes that affect contract performance. Most standard US construction contracts (e.g., American Institute of Architects and ConsensusDocs) and federal and most state and local public construction contracts do not use the term force majeure, and instead provide relief for force majeure events in delay and time extension remedial clauses. Here we use the term force majeure to cover all such remedial clauses.


Continue Reading COVID-19’s Impact on Construction: Is There a Remedy? — Time Extension, Force Majeure, or More?

Parties in oil and gas, oilfield service, and energy infrastructure contracts often utilize Texas law in their contracts. During this time of pandemic and sharp decline in commodity prices, parties might wonder whether the pandemic, government orders, or shortages or interruptions in supply chains will be sufficient to excuse a delay or failure to perform. The answer will depend in large part on the circumstances of the delay or failure to perform, the industry, the contents of the contract, whether the contract contains a force majeure clause, and the particular language used in the force majeure clause.

Force Majeure Language Is Key

Texas courts do not apply a common law doctrine of force majeure in the absence of a force majeure provision in a contract. If there is no force majeure clause, there is no force majeure defense to non-performance. There may be an impossibility of performance (sometimes called frustration of purposes or impracticability of performance) defense available, but that is a separate analysis and is not synonymous with force majeure.


Continue Reading Force Majeure Under Texas Law in the Time of COVID-19

A party to a contract may under certain circumstances be excused from performing a contractual obligation when the failure to perform is caused by a “fortuitous event”—i.e., force majeure or an “act of God”—that makes performance impossible. Whether COVID-19 and related events, such as the pandemic declaration by the World Health Organization, government travel bans, or government declarations, constitute force majeure that impact contractual performance obligations depends on the language of the contract. Contracts often contain force majeure provisions, which will control in the event of a dispute over performance obligations. If the contract lacks a force majeure provision, or if the provision fails to address a particular event, such as a pandemic, specific default rules may apply depending on the jurisdiction, governing law, and industry.

Continue Reading Contract Disputes from COVID-19: Force Majeure Checklist

What many states call a “force majeure” clause is often called an “Act of God” clause in Mississippi. In contracts for services and contracts for real estate, contractual force majeure/Act of God clauses are enforceable, but there is no Act of God defense absent a contractual clause.

This is not the case for contracts for the sale of goods. Unlike with other states, Mississippi’s version of the Uniform Commercial Code (UCC or the Code) specifically addresses force majeure. Mississippi Code § 75-2-617 provides:

Deliveries may be suspended by either party in case of Act of God, war, riots, fire, explosion, flood, strike, lockout, injunction, inability to obtain fuel, power, raw materials, labor, containers, or transportation facilities, accident, breakage of machinery or apparatus, national defense requirements, or any cause beyond the control of such party, preventing the manufacture, shipment, acceptance, or consumption of a shipment of the goods or of a material upon which the manufacture of the goods is dependent. If, because of any such circumstance, seller is unable to supply the total demand for the goods, seller may allocate its available supply among itself and all of its customers, including those not under contract, in an equitable manner. Such deliveries so suspended shall be cancelled without liability, but the contract shall otherwise remain unaffected.

Importantly, this provision applies only to the seller — not the buyer — of goods. So even if a contract for the sale of goods does not contain a force majeure clause, Mississippi law reads one into the contract for the seller.


Continue Reading FORCE MAJEURE IN MISSISSIPPI

Suppliers and purchasers of any kind of movable, tangible property may be unaware that they have a powerful tool under the Uniform Commercial Code (UCC) for protecting themselves in this national time of uncertainty: a demand for adequate assurance.

Every state has adopted at least some portion of the UCC, though there are state-to-state variations. Article 2 of the UCC generally applies to any contract for the sale or purchase of goods (but not service or real estate contracts). When contracts cover both goods and services, some states look to whether the dispute centers on the goods, while others examine the predominant purpose of the contract.

If the UCC governs the parties’ contract, then under UCC Section 2-609, when one party to a contract is reasonably insecure that the other party won’t perform, it can send a written demand for adequate assurance. If assurance isn’t received in a reasonable time, not to exceed 30 days, the requesting party can treat the contract as terminated and seek damages.

A demand for adequate assurance is nothing more complicated than a writing asking for some form of assurance that the other party will perform. Types of assurance that courts have found reasonable include letters of credit, heightened warranties, and access to the other party’s books and records. Some courts have allowed verbal demands, but since the model statute requires that the demand be in writing, the safer course of action is to send a demand in writing.


Continue Reading COVID-19 Insecurity: Using a Demand for Adequate Assurance Under the UCC

The spread of the coronavirus (COVID-19) has caused businesses to consider the impact that this pandemic will have on short-term and long-term business operations and transactions. It has already delayed contractual discussions, particularly in light of the global market’s response to the spread of the virus. The pandemic poses a range of risk management and liability issues, and one concern is the invocation and application of force majeure clauses.

Force majeure will likely affect companies across a broad spectrum of industries, including oil and gas, renewables, petrochemical, hospitality, construction, healthcare, manufacturing, insurance, commercial, industrial, procurement and supply chain logistics, warehousing, retail leasing, and maritime.


Continue Reading COVID-19, Force Majeure, and Commercial Transactions

Residents of Houston, Texas held their breath once again on September 17, 2019, as Tropical Storm Imelda made landfall. The storm inundated the city with 43 inches of rain, making it the fourth-wettest tropical cyclone in the history of Texas and the fifth-wettest in the history of the continental United States.

The Texas

Please find below a recently published article from our Construction Team members, Stephen T. Miller and Tiffany C. Raush. The article “When Force Majeure Is For Sure: The Business of Constructing in Disaster-Prone Areas” was first published in the ConsensusDocs Construction Law Newsletter Volume 4, Issue 3. 

One could have predicted in early 2017 that