Lease & Contract Issues Caused by Coronavirus (COVID-19)

|

Does required closure allow contract termination?

Impossibility

  • The doctrine of impossibility excuses both parties from their obligations under a contract if the performance has been rendered impossible by events occurring after the contract was formed.
    1. The requirements:
      1. The impossibility must be OBJECTIVE.
        1. Objective impossibility occurs when the performance becomes LITERALLY IMPOSSIBLE
        2. for ANYONE because of circumstances beyond the control of the parties
    2. EXAMPLE: X promises to sell Y his horse, but the horse dies before X can deliver the horse.
  • Impossibility may excuse nonperformance where a party establishes that: (1) an unexpected intervening event occurred; (2) the parties’ agreement assumed such an event would not occur; and (3) the unexpected event made contractual performance impossible or impracticable.
  • Certain states insist on actual impossibility; others allow relief in cases of “impracticability”, which is less than true impossibility but nevertheless a high standard of proof.
  • See Restatement (Second) of Contracts § 261 (Am. Law Inst. 1981) (addressing the impracticability of performance). As one leading commentator explained, “extreme impracticability of performance may properly be regarded as having the same effect as strict impossibility of performance,” and performance is impossible when “it can only be done at an excessive and unreasonable cost, for which the parties had not bargained.” (17A AM. JUR. 2D Contracts §643 (2020).)
  • Virginia law follows the Restatement view: “Ordinarily, a supervening condition that renders a promisor’s performance temporarily impossible will not release him from the duty of performing, but will only suspend that obligation. Restatement (Second) of Contracts §269 (1981); 18 Samuel Williston, A Treatise on the Law of Contracts §1957, at 150 (3d ed. 1978). This general rule is inapplicable, however, if the delay will make the promisor’s performance materially more burdensome. Restatement (Second) of Contracts §269 (1981). In that instance, the promisor’s duty of performance is discharged rather than suspended. Id. Nevertheless, as the comments to the Restatement point out, ‘[t]he rule stated in this Section is, of course, subject to contrary agreement.’ Id. at cmt. a.” (Long Signature Homes, Inc. v. Fairfield Woods, Inc., 445 S.E.2d 489, 491, 248 Va. 95, 99 (1994).)

Force Majeure

  • The doctrine of force majeure is similar to that of impossibility, in that courts look to similar elements when considering the applicability of a force majeure clause:
    1. whether the event qualifies as force majeure under the contract;
    2. whether the risk of nonperformance was foreseeable and able to be mitigated; and
    3. whether performance is truly impossible.
  • The primary focus is on whether the clause encompasses the type of event a contractual party claims is causing its nonperformance.
    1. Force majeure clauses are generally interpreted narrowly; therefore, for an event to qualify as force majeure it must be outlined in the clause at issue.
    2. Even when a potential force majeure event is encompassed by the relevant clause, however, a party is under an obligation to mitigate any foreseeable risk of nonperformance, and cannot invoke force majeure where the potential nonperformance was foreseeable and could have been prevented or otherwise mitigated.
      1. “‘There may be more than one proximate cause of an event.’ Molchon v. Tyler, 262 Va. 175, 182, 546 S.E.2d 691, 696 (2001); Panousos v. Allen, 245 Va. 60, 65, 425 S.E.2d 496, 499 (1993). While it is self-evident that the rain must have been a proximate cause of the erosion of the slope, the record evidence would not have supported a defense by Westlake Properties that the rain was the sole proximate cause of the failure of the slope.” (Westlake Properties v. Westlake Pointe, 639 S.E.2d 257, 268, 273 Va. 107 (2007).)
    3. Furthermore, depending on the relevant contractual language and governing law, a party generally will be required to establish that performance is truly impossible rather than merely impracticable. In this regard, as noted above, the doctrine functions like that of impossibility; some jurisdictions may only require that performance be impracticable, and some contracts may set a different standard (e.g., performance is “inadvisable”).

Mortgage/Rent Abatement (Because Cannot Operate or Open)

The information contained in this presentation is intended only for the purpose of providing general information and does not constitute legal advice, nor is it a substitute for legal services. By providing this information we are not establishing an attorney-client relationship, and nothing contained in this presentation should be construed to necessarily be applicable to your unique situation. No such attorney- client relationship exists unless a written Engagement Agreement has been endorsed by McCormick Law & Consulting and the client. You should always engage the services of an attorney to determine which, if any, legal solutions are right for you.

Client Reviews

Swipe left to read more reviews!

Let's talk.


  • Disclaimer: In communicating with us in response to this website, do not send any confidential information. Information sent to us in response to this website will not be treated as confidential and does not constitute an attorney-client relationship. Our professional obligations require us to perform a conflicts check before undertaking any legal representation of you. No attorney-client relationship exists or should be assumed as a result of this communication. By submitting this form, you are opting into our mailing list (your information will not be shared with anyone else).

  • This field is for validation purposes and should be left unchanged.

Disclaimer

McCormick Law, PC d/b/a McCormick Law & Consulting is a boutique business and real estate law firm located in Norfolk, Virginia, that seamlessly serves clients throughout Virginia and North Carolina. Whether you are a new or existing client of the firm, McCormick Law, PC, cannot represent you on any new matter until the firm has made a determination that there is no conflict of interest and that it is willing to accept the new engagement. The testimonials on this website reflect the real-life experiences and opinions of our clients. However, the experiences are personal to those particular clients, and may not necessarily be representative of all clients. We do not claim, and you should not assume, that all clients will have the same experience. Your outcome may vary.

© McCormick Law & Consulting