What Legal Issues is Coronavirus Causing?
COVID-19, the illness caused by Coronavirus, is causing many issues for businesses. Supplies may be late or unavailable, and services may not be performed. These issues cause many unexpected costs and expenses to occur. If you are a business affected by Coronavirus, here are some legal principles that may apply to your transactions.
Breach of Contract
Most business transactions are done pursuant to a contract. It can be informal–where one business sends a request for services and another business provides them with an invoice. Or, a detailed, written contract can explicitly define the rules that apply to the transaction. In either circumstance, a breach of contract arises when a promise or responsibility goes unfulfilled, whether it’s the provision of services or the promise to pay for them. If a breach of contract occurs, excuses may exist that allows a party to avoid paying damages.
Force majeure is a legal term for a contract clause that allows a party to avoid its duties if an unforeseen event occurs. These clauses can be vague or explicitly detailed. For example, if Coronavirus causes workers to call in sick and replacement workers cannot be found, that may be grounds to avoid contractual duties under force majeure. However, each contract has its own specific language. If a dispute arises, a court would look to the specific contract language to see what the parties agreed upon. If a pandemic or widespread illness is not listed, it may not be an excuse. However, collateral effects, such as governmental shut down of operations or disruption to the supply chain may permit avoidance of contractual duties. Because each case is different, it’s best to have a lawyer review the specific language in the contract and provide a legal opinion regarding the specific facts causing disruption. When drafting a contract, it’s best to avoid broad, vague terms and be precise regarding the circumstances allowing a party to avoid duties.
Business Contract Attorney
If you have questions about Coronavirus impact on business transactions, contact Eric Rice at (651) 998-9660 for a free consultation regarding your options. Eric is an experienced business lawyer who has advised companies regarding contract drafting and litigation options if a breach of contract occurs.