COVID-19 has fractured business and commercial enterprises on a global scale. Economic uncertainty abounds, and businesses are scrambling to make adjustments and remain solvent.
Under the weight of new and ever-shifting COVID-19 restrictions, many businesses are vulnerable to lapses in performance and contractual obligations. South Carolina business attorneys are likewise adjusting to advise clients about their exposure and risks regarding non-performance, breach of contract, and COVID 19.
Is COVID-19 an Excuse for Non-performance?
While COVID-19 has wreaked social and economic havoc on a global scale, it is not necessarily a get-out-of-jail-free card for non-performance and breach of contract. While contract terms and common law may provide some defense against performance breaches, a more specific examination of individual contracts is necessary to determine if defenses exist.
Analyzing Contracts in Response to COVID-19 Breaches
A few of the ways to analyze contract breaches concerning COVID-19 are the following:
Contractual Rights and Obligations
Any business impacted by COVID-19 should carefully examine their contracts to determine the parties’ rights and obligations. Both parties may bear fault, and each party should shore up their position and ensure compliance to the greatest extent before assigning blame against the other party.
When analyzing contracts in the face of non-performance or breach of contract, parties should take note:
- Does the contract contain a force majeure provision?
- Does the contract or force majeure provision detail the types of catastrophic events that may interrupt operations and obligations?
- Is there a required notification process whereby other parties must be informed when such an event and an interruption of performance occurs?
- Are common-law doctrines applicable?
Finally, it is critical to ascertain the extent to which COVID-19 be directly linked to the company’s non-performance or breach of contract?
Many commercial contracts contain a provision to excuse or suspend performance in the face of an uncontrollable, extraordinary event. This provision is known as Force Majeure or, more commonly, the “Act of God” provision.
Force Majeure is not in itself a defense against breach of contract. It is, instead, a provision to allow temporary relief from performance under uncontrollable and significant events:
- acts of war
- natural disasters
Again, while one may argue that the global coronavirus pandemic fits as a force majeure, contractual force majeure provisions generally allow temporary relief, not permanence breach, of contractual obligations. In the absence of a force majeure defense, the common law Frustration of Purpose Doctrine and the Doctrine of Impossibility may still provide some protection.
The Frustration of Purpose Doctrine has long been held in South Carolina courts to be a viable defense for breach of contract only if the principal purpose of the party making the contract was substantially frustrated, and that the absence of the frustration was anticipated at the time the contract was entered into.
The Doctrine of Impossibility is perhaps a greater defense against non-performance and breach of contract than the frustration of purpose. Long-held to excuse performance when impossible acts of God or the other party interfere with contractual performance obligations, the Doctrine of Impossibility may provide a defense for COVID-19 related breached performance.
South Carolina Business Attorneys, COVID-19, and Your Business
The full impact of COVID-19 and resulting commercial restrictions have yet to be felt. In uncertain times, you need a business attorney to help you navigate contractual obligations between you and your counterparts. South Carolina’s robust business sector has not been immune to the negative effects of COVID-19 regulations heaped on businesses and communities, state and nationwide.
Take steps today to protect your business and economic relationships. Contact our office to speak with an experienced South Carolina Business attorney about surviving the COVID-19 marketplace.