For the vast majority of us, the speed and scope of the coronavirus pandemic came as a surprise.
Only weeks ago, everything seemed normal—but now many major cities are on lock down, neighboring countries are closing their borders, and the economy is slipping towards recession.
This abrupt change in our reality is reminiscent of a natural disaster and seems to embody the very essence of a force majeure defense. Indeed, a central element of any force majeure claim is that the event that triggers the non-performance must not be foreseeable.[1]
But, we are hearing that some in the market are now arguing that this was all foreseeable, and therefore the pandemic is not a force majeure. Can this be? Can a counter party really claim that the onslaught of the coronavirus (or another disease like it) is really that unforeseeable?
Civilization has been beset by plagues since there has been civilization—it is a key risk of living together in close quarters. Various governments and civil society organizations have been warning of pandemics for years, and the devastating impact of the Spanish flu is still widely known and studied. Indeed, the recent past has seen outbreaks of SARS, swine flu, and ebola, and Hollywood regularly makes movies that use a pandemic as a key plot point.
In this context, is it possible to defeat a force majeure claim by claiming foreseeability?
The basic framework: force majeure
Force majeure is a contractual doctrine and thus varies by state. In most states—for example, New York and Delaware—its scope is limited to the language of the force majeure provision included in the parties’ contract.[2]
In other states, such as California, it has an independent basis in state law and so will operate even if the parties do not include a force majeure provision in their contract.[3]
In almost all cases, however, foreseeability of an event negates a force majeure claim based on that event.[4]
Foreseeability and coronavirus
The issue of whether a pandemic is foreseeable is a novel one—the lack of severe outbreaks in the United States in recent memory means that no court has weighed in on this directly.
But we can learn from other, similar cases. For example, in Gulf Oil Corp. v. F.E.R.C., 706 F.2d 444 (3d Cir. 1983), the court noted that a hurricane is considered a force majeure event.
Reasoning by analogy, coronavirus would likely be considered unforeseeable, because the exact timing, nature, and severity of the outbreak is similar to a hurricane: one may know that some sort of outbreak will likely happen at some point, but the event and its impacts are unpredictable enough that the event can support a force majeure defense.
Similarly, in Phibro Energy, Inc. v. Empresa De Polimeros De Sines Sarl, 720 F. Supp. 312 (S.D.N.Y. 1989), when considering equipment failures, the court found that “the fact that routine mechanical breakdowns were foreseen, does not necessarily mean major breakdowns were foreseeable.”
The overall theme in these cases is that while certain classes of events may be expected—hurricanes, equipment failures, war, and even pandemics—the fact that we know that they are likely to happen at some point does not mean that they are foreseeable for the purposes of a force majeure defense. Rather, the unpredictable nature of these type of events mean that they are likely to be considered unforeseeable.
Yet, with the economic downturn produced by the coronavirus, it is likely that this issue will be seriously litigated in the years to come. Zealous lawyers are unlikely to concede the point, and foreseeability is an question of fact, and therefore may be ultimately decided by juries.[5]
Finally, it may be that as public awareness grows about the pandemic, and we learn just how predictable it was (and how we failed to take steps to prevent it), questions about whether the pandemic was “foreseeable” may be subject to more scrutiny.
[1] See Gulf Oil Corp. v. F.E.R.C., 706 F.2d 444, 452 (3d Cir. 1983).
[2] See Gen. Elec. Co. v. Metals Res. Grp. Ltd., 741 N.Y.S.2d 218, 220 (2002); Stroud v. Forest Gate Dev. Corp., No. CIV.A. 20063-NC, 2004 WL 1087373, at *5 (Del. Ch. May 5, 2004).
[3] See CAL. CIV. CODE § 1511 (“The want of performance of an obligation, or of an offer of performance, in whole or in part, or any delay therein, is excused by the following causes, to the extent to which they operate:…(2) When it is prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary.”).
[4] See Phibro Energy, Inc. v. Empresa De Polimeros De Sines Sarl, 720 F. Supp. 312, 318 (S.D.N.Y. 1989) (New York); Stroud, 2004 WL 1087373, at *5 (Delaware); Emelianenko v. Affliction Clothing, No. CV0907865MMMMLGX, 2011 WL 13176615, at *27 (C.D. Cal. June 7, 2011) (California).
[5] See Phibro, 720 F. Supp. at 318; Emelianenko, 2011 WL 13176615, at *27.
