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Force Majeure During COVID-19

Force Majeure is a French term meaning “superior strength,” and is the concept that something of superior strength caused one party to a contract to be unable to perform the terms of the agreement.  With the entire state being shut down due to COVID-19, hundreds of conventions, concerts, events, and weddings have been canceled.  Each one of those events had a contract to be performed, with money either owed or already paid.  So, what do you need to know to protect yourself?

The general rule is the nonperformance of an obligation is excused when caused by an act of God.[1] “Act of God,” refer to those natural causes whose effects cannot be prevented by the exercise of prudence, diligence, care.[2]  However, this general rule does not apply where the party asserting the defense could have avoided the loss by complying with their contract.[3]

The act of God also must be the proximate cause of the nonperformance of the contract.[4]  In particular, if human negligence contributes to causing the loss or injury, act of God may not apply.[5]  Beware also, contract terms may provide that a loss occasioned by acts of God will be apportioned between the contracting parties[6] or that acts of God will merely suspend performance.[7]

With COVID-19, the government has ordered everything shut down[8].  Performance can be excused when a governmental act prohibits the doing of the thing provided for by the contract[9] even though there may have been a stipulation that this will not be an excuse.[10]  In San Diego, gatherings have been banned by executive order[11].

Have an attorney review your contract’s terms.  Determining whether these executive orders protect you will be vital in the coming months after COVID-19’s lock down has passed.

By Andrew R. Stilwell, Esq., Attorney at Contreras Law Firm

[1] Sun Oil Co. of California v. Union Drilling & Petroleum Co., 208 Cal. 114(1929); Squillante v. California Lands, 5 Cal. App. 2d 89 (4th Dist. 1935).

[2] Inyo Chemical Co. v. City of Los Angeles, 5 Cal. 2d 525 (1936).

[3] Holt Mfg. Co. v. Thornton, 136 Cal. 232 (1902).

[4] Hong Kong Islands Line America S.A. v. Distribution Services Ltd., 795 F. Supp. 983 (C.D. Cal. 1991), aff’d, 963 F.2d 378 (9th Cir. 1992).

[5] Conlin v. Coyne, 19 Cal. App. 2d 78 (2d Dist. 1937).

[6] Ahlgren v. Walsh, 173 Cal. 27 (1916).

[7] Rehart v. Klossner, 48 Cal. App. 2d 46 (4th Dist. 1941).

[8] https://www.gov.ca.gov/wp-content/uploads/2020/03/3.19.20-attested-EO-N-33-20-COVID-19-HEALTH-ORDER.pdf

[9] Collins Hotel Co. v. Collins, 4 Cal. App. 379 (2d Dist. 1906).

[10] Civ. Code, § 1511, subd. (1).

[11] https://www.sandiegocounty.gov/content/dam/sdc/hhsa/programs/phs/Epidemiology/HealthOfficerOrderCOVID19.pdf

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