Can I Get Out of a Business Contract Because of the Coronavirus?
The Coronavirus (COVID-19) pandemic is an unprecedented public health crisis. The Florida Department of Health has confirmed nearly 30,000 cases in the state as of April 23rd—with many more likely to emerge in the coming weeks. To control the spread of the disease, much of the economy is temporarily shut down or restricted. Many companies are struggling with the fallout.
You may be wondering: Does my business have a right to get out of the contract because of the coronavirus? The answer is ‘it depends’—there is no guaranteed right to get out of a contract, but options may be available. Here, our Miami, FL business lawyers explain the most important things you need to know about getting out of a commercial agreement because of COVID-19.
No Guaranteed Right—But COVID-19 May Justify Changes
First and foremost, it is important for business owners to understand that there is no special, overriding rule or regulation that simply nullifies contracts in a public health crisis. Commercial agreements are still legally enforceable. That being said, a company may be able to get out of their obligations because of a specific clause in the agreement or on common law grounds. Here are four reasons why your business may be justified in getting out of a contract:
- Force Majeure: A force majeure clause is a contract provision that may excuse performance and/or limit damages when something happens that is wholly outside of the control of the parties. If your agreement contains a force majeure clause, you may be allowed out of the contract because of the coronavirus.
- Material Adverse Change (MAC) Clause: Similar to a force majeure clause, a material adverse change (MAC) clause allows buyers to escape an M&A transaction on the grounds of unforeseeable change in circumstances.
- Impossibility: When performance of an agreement is literally impossible, the parties may be excused from the contract. For example, if performance is prohibited by a coronavirus-related government shutdown, it may be excused. To be clear, this common law exception is narrowly interpreted by Florida’s courts.
- Impracticability/Frustration: Commercial impracticability and frustration of purpose are also important common law doctrines that, in limited circumstances, may excuse performance of an agreement.
To be clear, this is merely generalized information. Contracts must always be assessed on a case-by-case basis, with a close eye on the specific terms of the agreements. The bargained for language in the contract matters. Whether your company can get out of part or all of a contract will depend on the language and the specific circumstances of your case.
Get Help From Our Florida Contract Negotiation Lawyers Today
At Pike & Lustig, LLP, our Miami commercial litigation attorneys have extensive experience representing clients in contract negotiations. If you have questions about renegotiating or escaping an agreement due to the coronavirus outbreak, we are here to help. Contact us now for a confidential initial consultation. With offices in Miami and West Palm Beach, we are well-positioned to represent businesses throughout the wider region.