Practical Law Lease Agreement

Many U.S. states and cities have adopted “stay at home” or “Shelter in Place” orders, effectively forcing all “non-essential” businesses to close physical operations and cease operations unless their employees can work remotely. Contractors, landlords and tenants are now reviewing commercial leases, construction contracts, loan contracts and other commercial contracts to determine whether provisions relating to a case of force majeure are involved. This warning analyzes some of the possible consequences of the COVID 19 pandemic on force majeure provisions in commercial contracts. For companies in states that have not yet introduced a stay in the internal regulations, it is advisable to take all measures that the company is now trying to avoid or mitigate in the future losses. This could include an attempt to find new suppliers if the company`s current suppliers are unable to meet their obligations or hire staff remotely. Given that some states and cities have already taken these orders, it is likely that such injunctions will be able to be taken in all states of the country. By measures to reduce losses under the contract, the party concerned can support the argument that enforcement was impossible when it is necessary to defend non-performance in court, because the party concerned can demonstrate that it has explored all viable alternatives. The common law varies from state to state, but some jurisdictions provide that performance may be excused or delayed under a contract if (i) the performance of the contract becomes impossible or unenforceable due to reasonably unforeseen circumstances, or (ii) unforeseen circumstances thwart the performance in such a way as to deprive the party concerned of the benefit of the good deal. The force majeure clause refers to the date of the service, contractual remedies where the benefit is excused as a result of a force majeure event and the termination of the contract on the basis of the duration of the triggering event. As a general rule, a force majeure event triggers the remedies that apply only when the benefit becomes impossible and not when the performance under the contract becomes financially more burdensome. [1] Force Major Clauses: Key Issues, Practical Law Commercial Transactions, called March 23, 2020.

At the end of the day, the question of whether a party concerned can benefit from the remedies available in the event of force majeure under the terms of the contract or under the existing legislation is based on facts. If you feel you need to invoke the terms of a force majeure clause or if you are concerned that a consideration to your contract will do so, we advise you to consult your lawyer as soon as possible. The Uniform Trade Code (“UCC”) regulates the sale of goods and has been adopted by most states in the United States.