In economics, the term “act of God” is not associated with any particular religion or belief system. Contractual languages relating to force majeure are called force majeure clauses, which are often used by insurance companies. These clauses generally limit or eliminate liability for injury, damage and loss caused by force majeure. Is the coronavirus (COVID-19) pandemic an “act of force majeure”? This may seem like a philosophical or theological question – but it is very likely that it is a legal issue. What for? Indeed, the occurrence of a case of force majeure can extinguish the liability of a party in breach of contract. An act of worship can be legally significant in the following ways: Courts have recognized various events as a case of force majeure – tornadoes, earthquakes, deaths, extraordinarily high tides, high winds, and floods. Many property damage insurance policies exclude from their protection damage caused by a case of force majeure. Notably, some home insurance policies cover damage to the home itself related to certain acts of force majeure, but not to other buildings or structures owned by the policyholder. In contract law, force majeure can be interpreted as an implied defense under the rule of impossibility or impracticability.
If this is the case, the promise will be kept due to unforeseen events that were inevitable and would result in delays, costs or other insurmountable material violations. An act of God can mean many things to many people. But what does this mean legally? Our litigation group examines the many ways in which an “act of force majeure” in legal contracts has been interpreted by law and jurisdiction. The jurisprudence of God`s act can be as confusing and unpredictable as the acts of God Himself. Where is COVID-19? There is a lack of jurisprudence that interprets the language of God`s act in the context of pandemics or virus outbreaks. There is no doubt that parties whose contractual performance has been hindered by the coronavirus pandemic will invoke force majeure as a contractual or habitual defense, arguing that an unknown and unexpected natural phenomenon has occurred, so their non-compliance with a contractual obligation should be excused. Meanwhile, parties who want to enforce contracts or impose liability can take advantage of the economic consequences of the outbreak, arguing that the real crippling force was not the coronavirus, but its economic impact. An indication of direction in the contractual environment may be the other events listed as force majeure: many courts interpreting the force majeure provisions will use the specific examples of force majeure events to support the interpretation of broader terms such as force majeure.
Therefore, determining whether a pandemic or virus outbreak could be an act of force majeure could depend on the other misfortunes that the parties have imagined to excuse obligations under the contract. In any case, it depends on the details of the language of the contract, the circumstances of non-performance and the degree of avoidance. As for certain legal outcomes? Only God knows. Alston & Bird has formed a multidisciplinary working group to advise its clients on the business and legal impact of the coronavirus (COVID-19). You can see all our work on the coronavirus in all sectors and subscribe to our future webinars and tips. Force majeure has legal significance because “force majeure” is a legal excuse for the delay or non-performance of an obligation or the completion of a construction project. Many insurance policies do not cover damage caused by force majeure. Sometimes disputes arise as to whether a severe storm or other disaster was a case of force majeure (and therefore exempt from a claim) or a foreseeable natural event. In recent years, scientific advances in predicting and anticipating natural events have led some scholars to question the continued existence of God`s defense. Nevertheless, the wide range of lawsuits resulting from the Covid-19 pandemic, such as JN Contemporary Art v. Phillips Auctioneers LLC successfully raised this defense to emphasize that force majeure is still at least somewhat relevant today. In other contracts, such as indemnification, force majeure cannot be an excuse and, in fact, the central risk that the promisor assumes – such as flood insurance or crop insurance – may be the timing and extent of the damage.
In many cases, not ignoring the obvious risks due to “natural phenomena” is not enough to excuse the fulfillment of the obligation, even if the events are relatively rare: for example, the year 2000 problem in computers.