KBS Reference Desk: Force Majeure and COVID-19

Q:        The district was contacted on Friday by a food vendor, stating that the district’s next shipment of food would be delivered on April 1, 2020. As COVID-19 has continued to spread and required the district to close campuses, the district does not need the food at its campuses anymore. Can the district cancel or reschedule the food delivery during the time that the campuses are closed during the COVID-19 pandemic? 

A:        Maybe, depending upon the terms of the contract, specifically the force majeure clause.

The first step in cancelling or rescheduling contractual obligations is to talk with the vendor and attempt to negotiate a modification to the contract terms. If the vendor does not wish to cooperate, then the district should look to its contract to determine whether and how it may avoid obligations. Force majeure clauses specifically address the circumstances under which a party may avoid its obligations under the contract. These clauses are generally toward the end of the contract or in the termination provisions and are identified with a bold heading. Force majeure clauses vary so it is important to look closely at the language in the contract to identify whether the pandemic falls within one of the prescribed circumstances for contract avoidance.

Force majeure generally means a natural or unavoidable force or unforeseeable circumstance that causes a party to be unable to fulfill its obligations under the contract. Most contracts include force majeure clauses which limit the party’s liability in the case of certain force majeure events identified in the contract. Examples of such events can include fires, floods, hurricanes and natural disasters, explosions, wars, riots, strikes, pandemics, and epidemics. Force majeure clauses may also include more broad language, including “Acts of God” and catch-all phrases such as “any other event beyond the reasonable control of the parties” or “and any other like events.” The more specifically a contract addresses the event that the district is seeking to use as a force majeure, the more likely the claim will be successful.

Here, the first thing the district should do is contact the vendor to determine whether the vendor is open and agreeable to modification. Because of the nature of the pandemic, it is likely that many vendors will want to modify the terms as well. If the parties cannot agree on modified terms, or if the district needs to cancel the contract in its entirety, the district should look to its force majeure clause. Force majeure clauses which specifically include pandemics and epidemics will be the most helpful. Other qualifying events could include events dealing with health crises or school closures. Notice should be provided in writing to the vendor of the District’s intent to invoke the force majeure clause and terminate or suspend the contract terms pending conclusion of the pandemic. Contact your district’s legal counsel for assistance with drafting this notice or for specific questions concerning force majeure clauses and specific contractual obligations.

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