As state and federal leaders increasingly implement restrictions on everyday life – including business functions – in an effort slow the spread of COVID-19, you may find yourself suddenly concerned about fulfilling your contractual obligations. In such a case, you may quickly begin to wonder whether you are protected from liability if you cannot perform your contractual obligations. Whether you have a force majeure clause designed to protect you from liability during unforeseen disasters or your contract is silent on the issue, the short answer is it depends.
The Force Majeure Clause
In the most general sense, the term force majeure refers to a superior, irresistible event that is more commonly known as an “act of God.”1 These are events that cannot be foreseen or controlled.2 When the parties include a force majeure clause in their contract, it is typically to specifically provide what events constitute a force majeure event and/or to determine how such events will impact the contractual relationship.
Force majeure clauses in contracts often include a list of events that can trigger the force majeure clause, such as natural disasters, wars, and acts of the government. Some contracts even include pandemics or epidemics in the list of events that may be considered force majeure. Other contracts, however, provide a more general “catch-all” provision that may encompass a myriad of fortuitous events beyond those enumerated specifically in the contract.
Louisiana courts generally enforce force majeure clauses in accordance with the general rules of contractual interpretation. The plain language of the contract governs. Unless the language is ambiguous, the Courts will not look beyond the four corners of the document in a search for an extrinsic interpretation.3 Further, the “cardinal” rule is that the Court will consider the provision in light of the remaining terms of the contract to give effect to the intent of the parties when they entered into the obligation.4
Thus, if you have a contract that contains a force majeure clause, the express terms of that contract will govern. For example, if your contract specifically indicates a pandemic or declaration of emergency to be a force majeure event, then it is highly likely a Court would find that an inability to performance under the present circumstances to be a result of force majeure. However, if your contract expressly lists a number of other circumstances that constitute force majeure and does not include a pandemic or declaration of emergency, you are less likely to succeed in arguing a force majeure event made the performance impossible. If the contract includes one of the “catch all” provisions, then the determination of whether the circumstances of the present outbreak constitute a force majeure event will likely involve a very in-depth analysis of the terms contained in your particular contract in light of the external circumstances that impacted performance.
It is also important to note, however, that the mere occurrence of a force majeure type event is generally not enough to excuse performance in some way. Rather, the contract will likely provide the performance must be impossible. If the contract does not indicate that performance must be impossible, the Court will still likely assume that is a condition of invoking the force majeure clause as the general intent of parties when entering into a contract is to ensure performance of obligations.
What If My Contract Doesn’t Contain a Force Majeure Clause?
If your contract does not address force majeure, you still may be able to argue a fortuitous event excuses any inability to fully perform the obligations incurred under your contract. The law provides that an obligor is not liable for his failure to perform his obligations when that failure is caused by a fortuitous event that has rendered performance impossible.5 Please note, these provisions constitute the default rules and apply only in an instance where your contract does not expressly address fortuitous events or force majeure event.
A fortuitous event is one that could not have reasonably been foreseen at the formation of the contract.6 Often the jurisprudence uses this term synonymously with the terms “force majeure” and “act of God.”7 This fortuitous event must render the performance actually impossible, not merely impracticable or more burdensome.8 Jurisprudence has shown that economic conditions and even hurricanes do not necessarily render performance impossible.9 Rather, the obligor is often bound to perform at any cost, even if burdensome or will cause financial ruin.10
Tips To Approach The Issue
- Start by looking at the plain language of your contract. If it contains a force majeure clause, that provision will control.
- Determine whether your performance is actually impossible or merely more difficult. Consider alternative methods of rendering performance to help you reach this decision.
- Look at the notice requirements, if any, contained within your contract to invoke force majeure protections.
- Under the circumstances a courtesy notice (even if not contractually required), may also help you avoid unnecessary disputes and future litigation.
- Gather and preserve all documentation related to the circumstance and your inabilities or difficulties to perform your obligations.
Ultimately, it is important to remember that whether you are entitled to force majeure questions may become a difficult legal question. We suggest seeking the assistance of counsel to address any uncertainties and ambiguities you and your business may face during this unprecedented time.
1 Saden v. Kirby, 660 So. 2d 423 (La. 1995).
2 Payne v. Hurwitz, 978 So. 2d 1000 (La. App. 1st Cir. 2008).
3 Louisiana Civil Code art. 2046.
4 Louisiana Civil Code art. 2045; Louisiana Civil Code art. 2050; Hanover Petroleum Corp. v. Tenneco, Inc., 521 So. 2d 1234 (La. App. 3rd Cir. 1988) citing Farrell v. Hodges Stock Yards, Inc., 323 So. 2d 1364 (La. 1977).
5 Louisiana Civil Code art. 1873 et seq.
6 Louisiana Civil Code art. 1875.
7 Payne v. Hurwitz, 978 So. 2d 1000 (La. App. 1st Cir. 2008).
8 Id; Hanover Petroleum Corp. v. Tenneco, Inc., 521 So. 2d 1234 (La. App. 3rd Cir. 1988); Schenk v. Capri Construction Co., 194 So. 2d 378 (La. App. 4th Cir. 1967).
9 Payne v. Hurwitz, 978 So. 2d 1000 (La. App. 1st Cir. 2008); Hanover Petroleum Corp. v. Tenneco, Inc., 521 So. 2d 1234 (La. App. 3rd Cir. 1988); Schenk v. Capri Construction Co., 194 So. 2d 378 (La. App. 4th Cir. 1967); Louisiana Civil Law Treatise, 5 La CVL §16 (2019 update).
10 Louisiana Civil Law Treatise, 5 La CVL §16:17 (2019 Update).
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.