Last week, the Governor of Florida, Ron DeSantis issued a state-wide confinement order commonly known as a “stay at home” order. Basically, the order allows Florida residents to leave their homes and interact with other people only for the purpose of engaging in essential activities or services. Consequently, businesses that are not considered essential have been forced to close or to limit their activities considerably. Nevertheless, these “non-essential” businesses are still bound by their respective contractual obligations, including, for example, their obligation to pay rent or to comply with their commercial responsibilities with their business partners. In light of this measure taken by Florida—which has also been adopted by many other states—businesses are uncertain about the impact that this measure may have on their contractual obligations under Florida law. Specifically, many business owners may wonder if the current circumstances constitute an event of force majeure or gives rise to other legal grounds to excuse performance of their contractual obligations.
Generally, force majeure clauses are contractual provisions that excuse parties from performing their contractual obligations due to unforeseen circumstances that are beyond the parties’ control. In Florida, the parties may contractually define the events that constitute force majeure, and generally, the parties are bound by the terms of their contracts. Stein v. Paradigm Mirasol, LLC, 586 F.3d 849, 857 (11th Cir. 2009) (applying Florida law). Consequently, a force majeure clause that lists a “pandemic” as a force majeure event, may be enforced in the context of COVID-19. In most cases, however, contracting parties fail to identify in their contracts the “force majeure event” that gives rise to their dispute.
Florida law requires that a party seeking to enforce a force majeure clause shows that the “force majeure event” was unforeseeable and beyond that party’s control. Bloom v. Home Devco/Tivoli Isles, LLC, 2009 WL 36594, at *4 (S.D. Fla. Jan. 6, 2009) (citing Florida Power Corp. v. City of Tallahassee, 18 So.2d 671, 675 (Fla. 1944)). They must also show that they were not negligent in performing their obligations under the contract. Id. For example, in Devco Dev. Corp. v. Hooker Homes, Inc., 518 So. 2d 922, 923 (Fla. 2d DCA 1987), the Second District Court of Appeal upheld the enforcement of a force majeure clause finding that a developer was excused from complying with the project deadlines because excessive rain prevented the developer from complying with the contract’s terms. In another case, the Third District Court of Appeal excused a developer from complying with its contractual targets, finding that the delays incurred by the developer had been caused by a heart attack suffered by the company’s president. Camacho Enterprises, Inc. v. Better Const. Co., 343 So. 2d 1296, 1297 (Fla. 3d DCA 1977). Both courts found these circumstances to be unforeseen and beyond the parties’ control. By contrast, worsening of economic conditions is generally not considered a force majeure event1. Stein, 586 F.3d at 858.
In sum, based on these cases and considering the severity of the pandemic and the Government measures—restricting people’s ability to conduct their businesses—it’s possible that in some instances, Florida courts may find that the COVID-19 pandemic constitutes a force majeure event. Of course, courts will look primarily at the language of the contract and the force majeure clause to make this determination2.
For this reason, we recommend that businesses impacted by COVID-19 consult with their lawyers to determine the rights and obligations they may have under their existing contracts. Specifically, businesses should review with counsel (1) any force majeure clauses in their contracts, (2) the contract’s governing law, (3) notice requirements and (4) the possibility of invoking state law defenses such as impossibility of performance and frustration of purpose. We will continue to closely monitor the legal and business implications associated with the COVID-19 pandemic and report on any further developments.
For additional information, please contact Diego Pérez Ara at dperez@leoncosgrove.com.
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1 To our knowledge, there are no cases in Florida where the courts have had to analyze force majeure clauses in the context of a pandemic.
2 For cases in which the parties’ contracts do not contain force majeure clauses, parties may still assert the defenses of impossibility of performance, and/or frustration of purpose which are well-recognized defenses to nonperformance of contracts under Florida law and may be applicable in this context.
