As many cities and states prepare to reopen for business with the reality of COVID-19, transportation companies and their clients are reviewing their contractual obligations, and asking whether the pandemic may relieve them of performance obligations and/or contemplate a renegotiation of terms in the best interests of all parties. Those companies now seek to determine if the pandemic and ensuing government restrictions will excuse their inability to provide services in otherwise binding contracts.
Windels Marx Partner Matt Daus
The Windels Marx Transportation Practice Group, chaired by Matt Daus, has prepared a white paper and resource guide called COVID-19 ‘Act of God’ Contract Clauses: Are Your Transportation Provider Contracts Still Valid? This white paper provides an overview of the law relating to Act of God provisions, and their applicability to the COVID-19 pandemic, as well as a contract review checklist and FAQs.
Recent government actions included travel restrictions, shelter-in-place, and work-from-home mandates, not to mention school and sporting activity closures and limits on general crowd sizes. So, given the government-mandated shutdowns, what are the responsibilities for transportation companies that have been unable to operate? In short, the answer depends on the contractual language, the state law governing the contract, and the purpose of the contract. These restrictions have particularly impacted the transportation industry, which will also be considered as the purpose of the contract may be frustrated by government actions.
Multiple legal theories will apply to transportation contracts tested by the pandemic, and attorneys will invoke “force majeure” provisions—commonly known as Act of God provisions—and rely upon the legal doctrines of frustration of purpose or impossibility/impracticality. The unprecedented nature of the effect of the COVID-19 shutdown increases the probability of success, as these principles are most commonly successful when the event in question is “unforeseeable” when the contract was made. A more specific answer of whether the non-performance is “excused” depends on the particular facts and the specific language of the contract in question.
In addition to the white paper, Windels Marx is also offering a free consultation to review the force majeure provisions of a current or proposed contact to help determine if you are excused from your contractural obligations due to the pandemic-related shutdown. The guide and more information can be obtained by emailing mdaus@windelsmarx.com.
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[06.29.20]