Force majeure provisions are top of mind for many businesses today because of the pandemic of SARS-CoV-2, which causes the novel coronavirus disease called COVID-19. “Pandemics” are typically not specified in general commercial contract force majeure clauses, but “acts of God” are, along with a series of other bases for contract relief. This article provides a brief overview of two largely overlapping arguments potentially available to those seeking to excuse performance under a commercial contract governed by Georgia law due to COVID-19 when there is no contractual provision specifying “pandemic,” “epidemic,” or the like: (1) under the “act of God” provision that may exist in a contract and (2) under the “act of God” defense to a breach of contract action which is provided for under Georgia law, O.C.G.A. § 13-4-21.
Contractual Force Majeure Provision—“act of God”
An “act of God” provision, frequently included in a force majeure clause, sets forth conditions that, if triggered, permit parties to take actions under a contract, which may include suspending performance or even terminating the contract. (The scope of any relief provided under such clauses is dictated by the terms of the contract.) The items typically included in a force majeure clause, other than “act of God,” tend to be human-caused, for example, strikes, war, government or state action, etc. Without inclusion of an item akin to “pandemic,” contracting parties seeking to suspend or avoid performance of their contractual obligations are likely to look to “act of God” as a savior. But the Georgia case law on what constitutes an “act of God” is silent with respect to whether a pandemic counts as one. And, not all “act of God” provisions are equal; some by their terms expressly or contextually limit qualifying acts of God (e.g., to weather-related events).
Although the Georgia case law is silent with respect to whether pandemics or viral outbreaks constitute an “act of God,” principles guiding the “act of God” jurisprudence suggest that when these cases wind their way through the courts, we will see a patchwork of judicial decisions and jury verdicts. See
Many Georgia cases describe an “act of God” as something caused by nature, for example, “'[a]n overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado.'”
Human intervention (or a negligent or intentional lack thereof) also cannot have been part of the cause for the disruption. For example, in 1955, the
To be sure, COVID-19 is novel and caused by one of a group of viruses that is part of nature. As the
Coronaviruses are a large group of viruses that are common among animals and humans. This novel coronavirus that causes COVID-19 is a newly discovered coronavirus that has not been previously detected in animals or humans. The source of this virus is not yet known.
And there is no doubt that the pandemic is outside the control of any individual business. But these are the sole probable agreements between litigants. Companies seeking to enforce contractual obligations are likely to point to myriad arguable intervening human failures that brought this pandemic to
The words of the contract at issue will principally guide any court being asked to apply, or deny the application of, an “act of God” provision. But what courts and juries will do in any specific instance is not predictable based on the jurisprudence and facts presently known about COVID-19.
The “act of God” defense in O.C.G.A. §
A contract need not include a force majeure provision in order for a party to invoke “act of God” as a defense to non-performance of a contract. Section
If performance of the terms of a contract becomes impossible as a result of an act of God, such impossibility shall excuse nonperformance, except where, by proper prudence, such impossibility might have been avoided by the promisor.
Elsewhere, the Georgia Code defines “Act of God” to mean “an accident produced by physical causes which are irresistible or inevitable, such as lightning, storms, perils of the sea, earthquakes, inundations, sudden death, or illness. This expression excludes all idea of human agency.” O.C.G.A. § 1-3-3; see also Royal Indem. Co. v. McClatchey, 101 Ga. App. 507, 510 (1960) (“Although Code § 102-103 defines accident and 'act of God' for their statutory meaning, these definitions are persuasive as to the general meaning in
Notably, this statutory defense requires that the act of God render performance “impossible,” while a contractual “act of God” provision may relieve performance for difficulty that is something less than impossibility. Otherwise, the applicability of this defense to a COVID-19-inspired dispute is just as subject to the human-culpability arguments as noted above.
In sum, whether COVID-19 is an unexpected, naturally occurring, and overwhelming pandemic of a novel virus or is something that was predictable and involved human agency is yet to be determined. Before relying on claims that COVID-19 is an “act of God” to excuse performance, counsel should be sought as to the arguable application of COVID-19 to the circumstances of your case. There may also be other arguments used to avoid or suspend performance of a contract (e.g., frustration of purpose); those arguments are outside the scope of this article. Further, one should consider the content of future contracts and whether to consider the inclusion of a force majeure clause that includes reference to epidemics and pandemics.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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