In response to the public health crisis posed by the novel coronavirus, Governor Tom Wolf issued a stay at home order and has required that businesses not designated “life-sustaining” halt all physical operations. As a result, schools, businesses, and various state agencies have closed their locations and encouraged their staff and constituents to stay home. In addition, various group events—workshops, classes, performances, sporting events, etc.—have been cancelled, postponed, or transitioned online. For many working artists, not only do these changes significantly reduce income, but they may also impact legal obligations under contract. This article – borrowed and modified from an article drafted by our friends at the Massachusetts Volunteer Lawyers for the Arts – seeks to provide an explanation of how COVID-19 and other similar events may impact performance or terms of artist agreements.
NOTE: the information contained in this article is intended for educational purposes only and does not constitute legal advice. If you’re an artist or with an arts organization affected by the coronavirus outbreak and need legal assistance, please contact the Philadelphia Volunteer Lawyers for the Arts at [email protected] or visit our website at www.pvla.org.
What is “Force Majeure?”
By now you’ve probably seen the words “force majeure” tossed around by a variety of sources, particularly in relation to the coronavirus outbreak. It’s a French phrase (we cribbed most of our legal lexicon from the French) meaning “superior force,” and it refers to extreme conditions beyond anyone’s control. Historically, practitioners have used “force majeure” interchangeably with “Acts of God.”
Practically speaking, force majeure is a principal of contract law excusing nonperformance or permitting termination of a contract due, again, to extreme conditions outside of either party’s control. You’ll often see it in the form of a term or section of a written agreement, otherwise known as a “force majeure clause.” Common force majeure clauses may include language like this:
“Force Majeure. If either party is unable to perform its obligations under the terms of this Agreement due to Acts of God, fire, flood, explosion, earthquake, or other natural forces, government mandate, war, civil unrest, acts of terrorism, accident, strike or labor disturbance, or other causes reasonably beyond its control, such party will not be liable for damages to the other for any damages resulting from such nonperformance or otherwise from such causes.”
Again, the idea is to anticipate that sometimes unpredictable external conditions can make it impossible to perform under a contract. But no two force majeure clauses are the same—for example, you may see variations that include more industry-specific crises, such as a data breach, mechanical or hardware failure, embargo, etc. Different force majeure clauses may also grant different types of relief: the example above shields the parties from liability for nonperformance, but a different clause might permit early termination of the contract. The key is, if you have an agreement that includes a force majeure clause, review it carefully.
Is COVID-19 a Force Majeure Event?
The short answer is “Maybe? It depends.” If your contract’s force majeure clause specifically includes pandemic, epidemic, viral outbreak, etc., then you’re in the clear. However, traditionally, illness doesn’t constitute a force majeure event or an “Act of God.” Freifield v. Hennessy, 353 F.2d 97, 99 (3d Cir. 1965).
When interpreting contracts, when basic rules of language and construction fail, lawyers rely upon judicial opinions. Unfortunately, here in Pennsylvania, we don’t have a ton of case law defining “Acts of God,” much less in relation to pandemics. Last winter, however, one federal court in Louisiana defined an “Act of God” as:
a providential occurrence or extraordinary manifestation of the forces of nature, which could not have been foreseen and the effect thereof avoided by the exercise of reasonable prudence, diligence, and care, or by the use of those means, which the situation renders reasonable to employ.
Covey v. Seifert, No. 18-99-JWD-EWD, at *14 (M.D. La. Jan. 23, 2019) (quoting Saden v. Kirby, 660 So. 2d 423, 428 (La. 1995)).
In other words, according to this court, Acts of God boil down to a reasonableness standard: the event must be so extraordinary that you couldn’t have anticipated nor avoided it even by exercising reasonable care.
The Pennsylvania Supreme Court recently held that the COVID-19 pandemic constitutes a “natural disaster” because, like other natural disasters enumerated in section 7102 of the Pennsylvania Emergency Management Services Code, the pandemic has caused substantial economic hardship and loss of life. 35 Pa. C.S.A. §7102; Friends of DeVito v. Wolf, No. 68 MM, 2020 WL 1847100, at *12 (Pa. Apr. 13, 2020). Depending on the wording in your contract’s force majeure clause, this ruling could guide courts in determining whether COVID-19 can be considered a force majeure event for the purpose of your contract.
Unfortunately, we likely won’t really know whether COVID-19 constitutes a force majeure event until after the storm has passed and a court has been asked to rule on a breach of contract claim. However, the World Health Organization’s classification of the virus as a pandemic, Gov. Wolf’s prohibition on large gatherings, the president’s declaring a national emergency, and the ongoing CDC recommendations to practice social distancing as much as possible suggest COVID-19 presents a major and prolonged disruption to the plans and agreements people have made for the future.
What if My Contract Doesn’t Have a Force Majeure Clause?
Step one is to see if your contract has any other provisions permitting early termination without penalty and, ideally, without cause. Often these types of termination provisions have a notice requirement, but as with all contract terms, results may vary.
Otherwise, you might consider having a conversation with the other parties to your contract to come up with a plan moving forward. Can contract performance be postponed? In the case of workshops, seminars, classes, etc., is it something you can deliver remotely? Creative and successful solutions can often arise when parties come together to collaborate over meeting their respective needs.
If neither of these options yields a solution, you may be able to draw on the defenses of impossibility, impracticability, and frustration of purpose. If you are unable to perform because of an unforeseen event, and if nonperformance was through no fault of your own, you can raise these defenses and your contractual obligation may be excused. Restatement (Second) of Contracts § 261 (Am. Law Inst. 1981), quoted in Step Plan Servs., Inc. v. Koresko, 12 A.3d 401, 411 (Pa. Super. Ct. 2010).
Pennsylvania courts have held that where government regulations limit economic activity, an impossibility or impracticability defense may be appropriate. See Litman v. Peoples Nat. Gas Co., 303 Pa. Super. 345, 348 (Pa. Super. Ct. 1982); Kasemer v. Nat’l Fuel Gas Distrib. Corp., 279 Pa. Super. 334, 338 (Pa. Super. Ct. 1980). If your business was forced to close due to shutdown orders or you were otherwise unable to perform under your contract as a direct result of the recent regulations imposed by the government in response to the COVID-19 Pandemic, you may be able to raise this defense.
If you’re an artist or member of an arts organization in need of legal assistance, please contact PVLA at [email protected], or visit the client page of our website to fill out an application for legal services.