Webinar: Lessons Learned from Recent Headlines and Court Rulings on Contract Cases Across Industries

Duane Morris will be hosting the webinar, “Lessons Learned from Recent Headlines and Court Rulings on Contract Cases Across Industries,” on March 11, 2021, from 1:00 p.m. to 2:00 p.m. Eastern.

This is the fourth session of the Duane Morris COVID-19: Navigating Forward Webinar Series. For more information and the registration link, please visit the firm website.

Inauguration 2021: Anticipated Government Policy Updates and Changes Regarding COVID-19 Concerns

Duane Morris will be hosting the webinar, “Inauguration 2021: Anticipated Government Policy Updates and Changes Regarding COVID-19 Concerns,” on January 28, 2021, from 1:00 p.m. to 2:00 p.m. Eastern.

This is the first 2021 session of the Duane Morris COVID-19: Navigating Forward Webinar Series. For more information and the registration link, please visit the firm website.

Is COVID-19 A Contractual “Get-Out-Of-Jail-Free” Card?

COVID 19 is having a massive impact on supply chains and business continuity and, post lockdown, questions will be asked about who pays for this. The knee-jerk response of many businesses is that the pandemic is a unique, unforeseeable “Act of God” and that businesses which have furloughed staff or been forced to close during the lockdown or have had difficulties with their own supply chains or customers reducing purchase volumes, have no liabilities to or remedies against others for the consequent losses sustained. The reality is that on a case by case basis, businesses already adversely affected by this pandemic may find that contractual claims are being made against them or that they have a route to mitigate their losses by looking at their own contractual or statutory rights.

To read the full text of this post by Duane Morris partner Susan Laws, please visit the Duane Morris London Blog.

Social Distancing and Notarization During the COVID-19 Pandemic

With most of the country under stay-at-home orders and practicing social distancing, COVID-19 has become a major disruptive force for the indefinite future. One of the many business areas severely hindered by COVID-19 is contractual relationships between parties. Consenting parties to a new contract may agree that a PDF signature page sent by email suffices in these times, but what about statutory requirements that have to be satisfied? Real estate deeds and mortgages generally need to be notarized to be accepted for recording and for title companies to insure them. A will or trust agreement drawn up during the pandemic may need to be notarized as well to be given effect. Usual notary requirements include in-person, physical presence before the notary. How does that work with social distancing?

To read the full text of this Duane Morris Alert, please visit the firm website.

COVID-19 Based Contractual Rows Not Inevitable, Claim Lawyers

Contractors should take steps that are suitably appropriate to manage the spread of Covid-19 first and foremost.

They are being urged to achieve between themselves and their employers an approach to coronavirus-related issues that is fair to both parties and avoids disputes down the line.

Guidance on NEC contractual matters came from UK-based lawyers working for the American legal firm Duane Morris. Continue reading “COVID-19 Based Contractual Rows Not Inevitable, Claim Lawyers”

Legal Implications for Cancelling Conferences and Events Due to COVID-19

By Dominica C. Anderson

Based on growing concerns over the spread of COVID-19, large public gatherings, such as conferences and other events, are being cancelled at an increasing rate throughout the United States, and internationally. More than 50,000 people signed an online petition requesting the cancellation of the multi-day South by Southwest event in Austin, Texas. That and other conferences and large events are being cancelled daily. With at least 3,300 world-wide deaths, and approximately 200 confirmed cases in the U.S., large public events will continue to be cancelled for the near future.

Impacting the decision to cancel conferences and other large public events, large corporations are issuing policies (changing almost daily) such as: no nonessential travel; employees can attend conferences only if the conference has a travel ban from certain countries (i.e., you, employee, can attend the conference, but only if the conference bans attendance of people from certain COVID-19 troubled countries); and no attending public events larger than 10 people (last week the policy was 1,000 people or more). Most recently, companies have issued bans on guests being allowed onto their premises, and/or issued a mandatory work from home policy.

What are the legal ramifications of each of these edicts? Or of cancellations of conferences and other large public events? What happens to the contracts for each of these events, such as contracts with the attendees, the site, the vendors, the airlines, consultants, speakers, performers etc. What are the legal ramifications and what will be the financial impact from these cancellations? Will you be able to make an insurance claim to protect you?

Insurance companies are starting to see numerous notifications under Event Cancellation insurance. But will the cancellation be covered by your policy? Are you trying to submit a claim for cancelling an event due to the attendees’ fear, or event organizer’s fear of spreading or catching COVID-19 even though there is no ban on the event going forward? That may not be a covered claim.  While you may decide to cancel the event, just know that the cancellation may not be covered because the cancellation was not beyond the control of the event organizer.  Additionally, the typical cancellation insurance policy likely contains exclusions that come into play (e.g., the Communicable Disease exclusion – excluding coverage where fear causes a cancellation due to the World Health Organization’s world epidemic determination). Don’t assume your Event Cancellation Insurance will cover your expenses related to canceling.

Other insurance companies are seeing notifications of claims for Business Interruption coverage.   Presenting a covered claim under a Business Interruption Insurance policy may be difficult. The first question will be: Does the cause of loss qualify under the policy for coverage?  Recently, the UK made COVID-19 a registered notifiable disease to allow insurance claims to be filed. What will happen in the U.S.? And, what is the “loss”? Are there applicable exclusions precluding coverage? Unless you have a specific and unusual insurance policy,  recovering under an insurance policy for expenses due to COVID-19 may be very difficult.

These are just some of the legal issued to be sorted out in the coming months. But without recourse to insurance coverage, the contract disputes become even more key.

For more on Force Majeure Contract Clauses and COVID-19, see the March 4, 2020 Duane Morris Alert.

What Law Governs Force Majeure in Your International Supply Chain Agreement?

By Thomas R. Schmuhl

If a U.S. company has a sales or supply agreement with a buyer or supplier outside of the United States which has been disrupted or otherwise impacted by circumstances relating to the COVID-19 situation now garnering world-wide attention, determining whether or not force majeure applies may not be governed by traditional domestic U.S. law.

Since January 1, 1988, such international commercial agreements have been governed by the United Nations Convention on the International Sale of Goods, commonly known as the CISG. The CISG is an international convention with the full force of federal law that preempts state contract law that would otherwise govern such commercial agreements, including both the Uniform Commercial Code and common law.  Under the CISG, a sale taking place between a seller in one country which has acceded to the CISG and a buyer in another country which has acceded to the CISG, will be governed by the CISG just as a sale between a buyer in New York and a seller in Illinois will be governed by the Uniform Commercial Code. Simply put, the governing law of the international contract between the buyer and the seller is the CISG when the parties are in different countries which have each acceded to the CISG.  Many of the countries most impacted by the COVID-19 situation (e.g. the United States, China, Japan, South Korea, Italy, Canada) have acceded to the CISG.

In the present context of COVID-19, this means that whether the impact of the virus constitutes force majeure will be determined by the CISG unless, pursuant to Article 6 of the CISG, the parties to the contract have explicitly and clearly excluded the application of the CISG from the contract in whole or in part.  Article 79 of the CISG sets forth the standards for determining if a force majeure condition has arisen.  Those standards bear a resemblance (but are not identical) to the standards found in many commercial laws around the world such as Section 615 of Article 2 of the Uniform Commercial Code.

One quick and obvious lesson to be drawn from this brief discussion is that is that the best protection available to buyers and sellers in an international context is a carefully drafted force majeure clause that will minimize the uncertainty that can arise from having to analyze real events like an epidemic in the context of the principles propounded in a state or nation’s commercial code or the international CISG.

Can ‘force majeure’ save your company from the coronavirus?

The provision is a legal term known as force majeure. Taken from French civil law, force majeure is “a contract provision that excuses a party’s performance of its obligations under a contract when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible,” according to a recent coronavirus and force majeure story in The National Law Review.

Force majeure has been invoked in the past by companies seeking to explain contractual failures stemming from the Sept. 11 terrorist attacks, Hurricane Sandy, SARS, and Ebola. But the international response to the coronavirus—quarantines, shutdowns, and travel bans—has upended business as usual around the world in an unprecedented way, said attorney Gregory Bombard, a partner at the law firm Duane Morris.

Companies seeking to escape liability for failing to deliver the terms of a contract are scrambling for the legal cover to do so, he said. “They want to know: Who bears the risk if we can’t deliver?”

To read the full text of this article, please visit the Compliance Week website.

Does COVID-19 Outbreak Constitute a Force Majeure Event?

Unforeseeable circumstances – such as the outbreak of coronavirus – that prevent a party from fulfilling its contractual duties may fall under the force majeure clause of that contract.

Force majeure clauses are specific to each contract and operate as a risk allocation mechanism to govern situations that are beyond the parties’ control, such as the outbreak of war or natural disasters. Whether the COVID-19 outbreak constitutes a force majeure event depends on the exact wording and scope of the provision in the contract. For example, if the force majeure clause:

  • expressly specifies epidemics, diseases or public health emergencies, then COVID-19 likely qualifies as a force majeure event;
  • covers “acts of government,” then travel bans may be covered.

The party seeking to invoke force majeure usually must show a causal connection between the event – the outbreak of COVID-19 – that made it effectively impossible to perform its contractual duties. The clause may operate to excuse or suspend performance of a particular contractual duty.

Some companies are providing force majeure notices to their contract partners. The China Council for the Promotion of International Trade announced that it will offer force majeure certificates to help companies deal with overseas contractual requirements. The effectiveness of these certificates and notices will depend on the exact language of the contract’s force majeure clause.

If your contracts do not contain a force majeure clause, then the narrower doctrine of frustration of the contract purpose may apply. To qualify under this doctrine, the event must (1) be not reasonably foreseeable and (2) radically change the contract terms from what the parties agreed to.

Of course, there is no court guidance yet on how the COVID-19 outbreak may affect commercial contracts. The facts are still evolving. But as businesses prepare for the impact of the virus in the United States, they can look to the cases that arose out of past unexpected events like the September 11 terrorist attacks, previous changes in Chinese government policy or unprecedented weather events as a guide to how to deal with key contracts.

View the full Alert on the Duane Morris LLP website.