Breach of Contract, Force Majeure, and COVID-19

AdobeStock_343368495-300x200The coronavirus has created many new legal issues with unclear answers. Courts across the country will spend months – and likely years – sorting through a backlog of civil cases involving legal questions about the financial losses created by COVID-19. While it is not possible to predict the outcome in every case, there is some guidance from prior case law that can help business owners effectively plan to mitigate their liability. The experienced business lawyers at Structure Law Group can help develop a mitigation strategy that is tailored to your business. Learn more about the history of breach of contract case law – and how it can help you make informed decisions about your company’s contracts in the era of coronavirus.

Is COVID-19 a Valid Excuse to Breach a Contract?

Case law involving breach of contract goes back hundreds of years. Many different reasons for breach have been explored by the courts, but, of course, they have never before faced COVID-19. This is a new global phenomenon that has created unique challenges for business owners all over the world. To predict how courts will treat breach of contract related to COVID-19, one must examine the reasons they have excused breach in the past – or not excused it, imposing liability on the breaching party.

One of the fundamental principles of this area of case law is that the reason for the breach will determine the outcome of the case. The more control the breaching party has over the circumstances, the less excusable a breach will be. For example: if it is possible to complete the contract, but it will cost the breaching party more time or money, this is usually not sufficient grounds for excusing a breach of contract. On the other hand: if a change in law or government regulations would make it illegal to perform the contract, the breach is likely to be excused, as the court could not require illegal conduct.

So, will COVID-19 be seen as a valid reason for breaching business contracts? It will depend on the reasons for the breach. If, for example, a supplier hurt by COVID-19 is charging more the parts required to complete the contract, this added expense is unlikely to justify a breach of contract. But if temporary coronavirus health regulations prevent you from lawfully running your business, this could be excused, as the court cannot require your company to violate the law. The bottom line is that not all COVID-19 circumstances will justify all breaches of all contracts. This is why it is important for business owners to consult with an attorney about their contracts before making decisions that could expose them to liability.

California Business Attorneys For All Breach of Contract Claims

With the advice of an experienced California business lawyer, business owners can mitigate their liability related to COVID-19 breach of contract claims. Our skilled attorneys can also help companies defend their contracts from improper breaches. Contact Structure Law Group at (408) 441-7500. The sooner you have an experienced contract lawyer on your side, the better protected your company’s legal rights and financial interests will be.