There are many questions being raised about whether parties are required to perform under contracts during the COVID-19 health crisis. In some cases, government shutdowns have made performance impossible, and in other cases, health concerns have made performance unwise and impractical. A force majeure clause is a provision in an agreement that excuses a party from performance if an unforeseeable event arises. This type of clause is also commonly referred to as an “act of god” provision and it is a common starting point for a legal analysis of whether performance will be required due to concerns over COVID-19. However, what happens if your contract does not contain a force majeure clause?
If your contract is governed by Pennsylvania law, then the courts will likely look to common law, including the doctrine of impossibility and the frustration of purpose doctrine. The doctrine of impossibility applies in the event that a party’s performance was made impracticable through no fault of his own by an unforeseeable event, the non-occurrence of which was a basic assumption of both parties at the time of agreement. Performance will be excused, unless language or circumstances point otherwise. Pennsylvania’s definition of “impossibility” requires strict impracticability. As such, mere unanticipated difficulty is not likely to excuse performance. Pennsylvania’s frustration of purpose doctrine excuses performance even if it is still possible so long as the event substantially frustrates a party’s principal purpose. Additional requirements are the assumption by both parties that the event would not occur and no fault on behalf of the party asserting the application. The ultimate question for frustration is whether the unforeseeable event significantly altered the circumstances of the agreement such that performance would no longer fulfil any aspect of its original purpose.
If you have concerns about how COVID-19 will impact a contract with or without a force majeure clause, the lawyers at Sidkoff, Pincus & Green P.C. can assist you with these matters. To schedule an initial consultation, call our team at 215-574-0600 or contact us online. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.