Life as we knew it came to a screeching halt in 2020 when the COVID-19 pandemic hit. Even in previous global events like World War I and World War II, the events did not impact the health and economy of every nation worldwide at the same time. People were able to go to work in many cities without disruption, and supply chain issues were generally regional and temporary.
Thanks to COVID, many businesses had to shut their doors for weeks or months on end due to governmental orders. Business owners did not know when they could do their trade again, or what restrictions they would face. You might have been unable to get the essential materials you needed to perform your contracts or have enough workers to get the job done. A South Carolina business attorney can help you navigate the consequences of those events and answer the question, Is non-performance permitted? The impact of coronavirus on Contracts.
How to Determine Your Rights and Duties Under a Contract
There is no automatic result if you or another party could not perform under a contract during the COVID-19 pandemic. General principles of South Carolina will guide the interpretation of each party’s contractual rights and obligations, but you have to read each contract carefully and analyze its terms. You might have defenses if the contract contains certain terms, but have to look to other legal principles under common law if your agreement is silent on those items.
If both parties to a contract wanted to perform their obligations but could not, through no fault of their own, because an “act of God” interfered, that is a “force majeure” situation. To qualify as a “force majeure,” the event must be:
- Out of the control of the parties to the contract. Neither of you caused or contributed to the problem. The COVID-19 pandemic was not the fault of business owners in South Carolina.
- Significant. An event like the COVID-19 pandemic shut down the economy for months, unlike a thunderstorm that might cause a brief interference with normal activity.
You will need to read the contract and see if the document contains a force majeure provision. Usually, a force majeure provision allows temporary delays in performance but does not cancel the contract or the obligations under the contract. The terms of the contract will control.
If the COVID-19 pandemic made it impossible for you to perform your duties under the contract, the doctrine of impossibility might be a successful defense for non-performance. For example, you had a contract to manufacture and supply 10,000 units of plumbing parts a month to a hardware store.
The government forced you to close your manufacturing facility during the mandated lockdown, making it impossible for you to manufacture the parts required by the contract. No matter how much you wanted to keep working and making the parts, you could not do so.
Frustration of Purpose
If an event happened that was not anticipated when you entered into the contract, and that occurrence substantially frustrated you from performing your duties under the contract, you might argue the frustration of purpose defense for your non-performance. An example of this defense is if you experienced repeated supply chain problems in getting the materials you needed to perform your contractual duties or could not maintain a sufficient workforce to get the job done due to the pandemic.
The economic fallout from the COVID-19 pandemic has not yet ended, and the business community is struggling to resolve the consequences of contractual non-performance. A South Carolina business attorney can help you address these issues. For legal help contact our office today, we offer a free consultation.