COVID-19's Impact on Force Majeure Clauses and Similar Common Law Doctrines
Since the commencement of the COVID-19 crisis, many companies within the hospitality industry have been quick to react. Many companies have even unilaterally enforced the Force Majeure clauses within contracts and the doctrine of Frustration of Purpose in favor of their clients and customers.
- Marriott International hotels world-wide issued a statement allowing for full changes or cancellations, without a charge, up to 24 hours prior to a client’s scheduled arrival - as long as the change or cancellation is made by June 30, 2020. Other hotels have reacted in similar ways.
- JP Morgan/Chase automatically extended certain car leases in circumstances where leased vehicles were due in March, April and May.
- Walt Disney World automatically stopped charging customers for their annual passes.
- And, while arguably not necessary under these legal theories, many motor vehicle insurers automatically reduced premium rates for the months of April and May by varying percentages.
While Force Majeure clauses may be different in their wording from contract to contract and industry to industry, at their core they require a finding of three major elements in order to be enforced:
- The party attempting to enforce the clause must establish that the occurrence preventing them from performing their contractual duties is beyond their reasonable control;
- The enforcing party's ability to perform its obligations under the contract must have been prevented, impeded or hindered specifically by the occurrence; and
- The enforcing party must have taken all reasonable steps to avoid or mitigate the occurrence or its consequences.
Other than Florida hurricanes, it appears that COVID-19 may be one of the easier occurrences in the last few decades for parties contracting in Florida to establish their Force Majeure clauses.
Prior to COVID-19, many of the Florida cases relating to the enforcement of these clauses involved permits, codes and statutes, and required fact and legal intensive inquiries and investigations into whether the enforcing party could have taken steps to avoid breaching the contract. Here, hospitality businesses were quickly shut down by county and state orders. Additionally, if a contract does not expressly contain a Force Majeure clause, there are common law legal doctrines that provide the same protections.
Florida Common Law - Frustration of Purpose and the Doctrine of Impossibility of Performance
Under the doctrine of impossibility of performance or frustration of purpose, a party is discharged from performing a contractual obligation which is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible. See Marathon Sunsets, Inc. v. Coldiron
, 189 So. 3d 235, 236 (Fla. 3d DCA 2016).
We anticipate that courts throughout Florida will not tolerate cavalier or "business as usual" arguments when deciding whether to enforce these clauses or doctrines.
Companies must quickly decide whether their clients and customers will be able to establish these clauses and legal theories and then respond accordingly.
Anticipated Personal Injury Claims Due to Food/Drink Consumption
Now that COVID-19 has rapidly spread across the United States, many local governments (including those in Florida) have ordered hotels and restaurants to close their doors, though some restaurants are still open to serve their customers through delivery and carry-out. Regardless, thousands of hotel and restaurant employees have served thousands of customers with food and drinks since the outbreak of COVID-19, which is a highly contagious virus and is believed to be spread mainly from person-to-person and from contact with contaminated surfaces. Of course, tourism is Florida’s largest industry, and it is anticipated that many claims may be brought against Florida hotels and restaurants in the near future for any actions, or omissions, on their part that results in the transmission of COVID-19 to one (or more) of their customers.
There are several legal theories that an injured person may use to recover against hotels/restaurants for damages from contracting COVID-19 through contaminated food, drinks, or through surface/interpersonal contact, for example:
- negligence/negligence per se
- strict liability
- breach of warranty
- violation of local/state governmental business-closure orders
No matter what the legal theory is, Plaintiffs may very well have an uphill battle proving exactly how they were exposed to COVID-19. Causation may be easier to prove for multiple Plaintiffs who can trace exposure to one location. When it comes to causation, courts have commented that “a mere possibility of causation is not enough; and when the matter remains one of pure speculation or conjecture, or the probabilities are at best evenly balanced, it becomes the duty of the court to direct a verdict for the defendant.”
Comparative fault/assumption of the risk may also serve as defenses to some of these claims.
As for damages, those who suffer mild effects of the virus will obviously have a tough time arguing that they are entitled to significant compensation, though class actions have been filed in the past for contaminated food-borne illnesses that have affected a large number of people who can relate their exposure to a specific hotel or restaurant.