Written by: Stephen J. Corell, paralegal
Since March of 2020, the effects of the Covid-19 pandemic have been far-reaching and the death toll catastrophic. Some victims of the virus have even reported that, though they were able to survive it, the effects have gone on for months after the fact, haunting them with physical echoes of the virus even though they survived its onslaught.
Maybe you’re one of the lucky ones who have not contracted the virus, but that doesn’t mean its effects, or at the very least the legislative response to the virus, has not affected you. Restaurants have been forced to close their doors, many businesses are struggling, and according to some sources, the unemployment rate rose higher in three months due to the pandemic than it did for the entirety of the Great Recession, which lasted two years, from 2007 through 2009.
But what if, for example, you haven’t shut down, but maybe you signed a contract that you are finding it difficult to complete due to Covid-19? Maybe you’re a church who hired an independent contractor to provide services for your parish, only to have to shut your doors after paying the contractor. Maybe you’re a business that provides food infrastructure to restaurants that were forced to shut down and cannot pay you, despite your ability to still provide the food stock. Or maybe it’s as simple as the fact that you booked an Airbnb and can no longer travel due to New York’s latest quarantine requirements.
Whatever the case may be, Covid-19 has presented us all with a unique, unprecedented set of circumstances to analyze. In such times it is imperative to find a lawyer who understands contract law and can help you review your contract to determine your rights and obligations in this confusing time.
Generally speaking, anyone entering into a contract in New York should be aware, at the outset, that New York is a strict construction state, meaning that a contract entered into here will—again, generally—be interpreted according to the terms you agree to. Especially now, with the Covid-19 pandemic, it is important to make sure that your contracts specifically cover what happens if the pandemic gets in the way of completing your services.
This type of language was common in contracts long before Covid-19 though. These agreements usually take the form of “force majeure” (act of god) clauses, which allow you—or your co-contractor—to back out of the contract or receive a refund under circumstances beyond the control of either person or entity. Specifically, an act of god represents an event outside of the control of those involved in the contract which prevents performance on the contract. An important note, these clauses will not excuse circumstances that make your services merely burdensome, but rather objectively impossible, and normally only if a law or executive order specifically forbids you from continuing your business.
Recently, a restaurant found itself in just such a situation, having entered into an agreement only to have their business shut down by one of Governor Cuomo’s pandemic restrictions mere days later. As explained in more detail here, despite the implications of Cuomo’s order on the restaurant, the Court did not allow the restaurant to delay its services under the contract.
This demonstrates that, despite decades of precedent regarding what does or does not constitute a force majeure, or “act of god”, this is an entirely new and unique situation without easy answers or precedent to follow. Having good legal counsel is important for that reason and the cases and points of fact expressed here and in the linked articles may not apply to your specific case.
In fact, according to a ruling by New York’s highest Court, force majeure clauses are likely to be enforced “only if the force majeure clause specifically includes the event that actually prevents a party's performance will that party be excused.” Thus, unless you specifically thought ahead and put language in your contract regarding the pandemic, there is no guarantee you will be able to opt out of it. That doesn’t mean you’re out of luck though.
There are other questions to ask yourself—which your lawyer will likely ask you as well—about the details of what caused you to be unable to complete your contract.
For example, did one of Governor Cuomo’s Executive Orders explicitly state that your business had to physically shut down without enough notice to plan ahead? Or did the economic and financial repercussions of the pandemic simply make it impossible to keep doing business, resulting in a permanent, but voluntary, closing?
While both would be severe blows to your business, such a distinction may affect your ability to get refunded for services or back out of contracts. In one case, which precedes the pandemic, a business voluntarily shut down due to certain environmental regulations that made it nearly impossible to turn a profit, That business could not invoke its force majeure clause, as—regrettable as the circumstances might have been—the shut down was not forced on them by the government, but rather was a voluntary choice, even though it was an indirect result of the same extenuating circumstances.
Distinctions and questions like this are why it is important in these uncertain times to hire legal counsel to examine your circumstances and see if Covid-19 will be recognized as a valid opt-out in your contract. You could not have predicted that this would happen. If your contract was signed before even the first inklings of the pandemic began to take root, it likely contains no specific language regarding pandemics and executive orders resulting from them.
Whether the Covid-19 pandemic has caused you to be unable to perform the services you agreed to provide under your contract, or your business has been precluded from existing as it once did, seek out a lawyer who can examine the specifics of your case and see if any of the above will apply to your situation and contracts. As with anything, your specifics matter immensely and we’re here to help you walk through your Covid-19 story, whatever it may be.