Another post discussed that your existing contract can probably handle the risks related to COVID-19.  But, what to do if you contract lacks the support to handle COVID-19 and what to consider when creating new contracts during COVID-19?

What if the contract does not have a force majeure or other relief clause?  First, consider the language of any applicable changes clause.  Second, review any governmental emergency relief acts that could help.  Third, the common law doctrine of frustration may be available, under which an obligation may excused or discharged when a fundamental assumption of the contract is not true or something later occurs rendering performance physically impossible or commercially impracticable.  However, a radical price increase alone is likely insufficient.

When creating new contracts during COVID-19, do not rely solely upon force majeure clauses.  Because unforeseeability is an element of most clauses, parties contracting during an event will find it very difficult to argue they could not contemplate the potential impact of the event.  Consider including or adapting a price acceleration provision to prescribe or liquidate relief.

Published On: April 15, 2020

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