Key Takeaways
- A force majeure clause excuses performance only for the events and on the terms the contract itself specifies, so the exact wording is decisive.
- New York courts read these clauses narrowly and usually limit catch-all language to events similar to those listed, although some courts found the pandemic fell within broadly worded clauses.
- Even when force majeure applies, the affected party usually must mitigate, and common exclusions such as payment obligations can defeat a claim, as several COVID-era rent cases showed.
When a pandemic shuts down factories, borders, and businesses, does a contract's force majeure clause let a party off the hook? The answer depends less on the size of the disruption than on the words the parties chose.
In this TalksOnLaw Brief, Joel Cohen talks with José Antonio Morán, a partner at Baker McKenzie who serves on the Global Steering Committee of the firm's Projects Practice Group and its Energy, Mining & Infrastructure Industry Group, about how force majeure clauses work, how courts read them, and whether COVID-19 qualifies.
What Force Majeure Means
Morán explains that force majeure, sometimes called an act of God, addresses situations in which performing contract obligations becomes impossible, difficult, or onerous because of exceptional events outside either party's control. For contracts governed by common law, he describes two main drafting approaches.
Two Drafting Approaches
The first is a list of example events. Clauses that expressly name an epidemic or pandemic, government action, quarantine, or shortages of labor or materials may apply to COVID-19. Morán cautions against relying on open-ended catch-all language: New York law construes force majeure provisions narrowly, and a New York court typically will find an event covered by a catch-all only if it is of the same nature and kind as the events specifically listed. His main drafting takeaway is to add express pandemic and epidemic language to future clauses.
The second approach uses a general objective test, such as an event beyond a party's control, one that could not reasonably have been provided against or avoided, or one not attributable to either party.
Mitigation, Exclusions, and Remedies
Even when a clause is triggered, Morán explains, the affected party cannot sit on its hands. It often must mitigate, for example by sourcing alternative supply or labor, even at higher cost, or by moving personnel, and it should talk with the other party about alternative arrangements or an amendment. Clauses almost always contain exclusions, most commonly for obligations to pay money, along with economic hardship, reduced demand, and labor shortages, and these can negate otherwise valid claims. Remedies typically include excuse from liability for non-performance to the extent the event affects it, a right of suspension, and termination after a prolonged force majeure period.
What to Know Now
The COVID-19 litigation that followed largely bore out Morán's emphasis on drafting. In JN Contemporary Art LLC v. Phillips Auctioneers LLC (2d Cir. 2022), the court held that the pandemic and related shutdown orders fell within a clause covering circumstances beyond the parties' reasonable control, including natural disasters, even though the clause did not mention pandemics, which allowed the auction house to terminate. Other courts reached narrower results: in Gap Inc. v. Ponte Gadea New York LLC (S.D.N.Y. 2021), a retailer's rent was not excused, and New York courts repeatedly held that financial hardship alone does not establish impossibility.
The result is a body of law that rewards precise drafting. Parties seeking protection now commonly address pandemics, government orders, and payment obligations expressly, while counterparties focus on mitigation duties and notice requirements. As Cohen notes, outcomes still turn on the governing law and the specific contract language.
