Contracts and COVID-19
The COVID-19 pandemic of 2020—as well as government orders to contain it—has prevented countless people, babysitters to basketball players, from fulfilling their contracts. Are all of these parties legally liable for breaching their contracts? Or are they excused due to this extraordinary event? What about payments made in advance, such as tickets bought for a concert that has now been canceled, or a dorm room leased at a college that is now closed?
Part I of this Essay will describe the legal doctrines of Impossibility and Restitution and how they might apply to a contract undermined by the COVID-19 pandemic. Part II will explain how a Force Majeure clause alters those background doctrines to give—or withhold—relief to a party whose performance has been thwarted by the pandemic.
Finally, Subpart II.C will peer into the future and predict that many parties will likely revise their Force Majeure clauses to ensure they cover a pandemic like this. While such a revision may seem obvious from a legal perspective, it may not be optimal from a business perspective, as it may lead counterparties to greatly lower the price they are willing to pay—or even refuse entirely to make a deal. Indeed, some parties may conclude that the default Impossibility doctrine provides better protection than a Force Majeure clause, as it covers any and all unexpected cataclysms, not just those expressly listed in the contract.
