Sodexo Operations, LLC v. Va. Aquarium & Marine Sci. Ctr. Found., Inc., No. 2:20-cv-00309-AWA-RJK (ED. Va. 2020) (The food service provider exercised the right to terminate the contract under the terms « force majeure » and « government policy » in the force majeure clause, alleging that the defendant`s refusal to reimburse the plaintiff an undepreciated portion of the capital investment constitutes a breach of contract.) (16.06.2020 Complaint) The effect of a force majeure clause, which simply excuses any future performance by one of the parties, can be a trap if the force majeure event occurs when one party has substantially provided performance. For example, in a case involving a contract for a live event at a resort, NetOne, Inc. v. Panache Destination Management, Inc., No. 20-cv-00150-DKW-WRP (D. Hawaii 5.

June 2020), considered the pandemic a force majeure event that exempted both parties from future benefits under the contract. But the party that booked the event had already paid a substantial down payment – that is, it had almost completed its performance – while the station had done some work in preparation for the event, but had not organized an event. The reserving party brought an action for a refund of its deposit. Their claim was rejected because the contract was clear: force majeure released both parties from future performance, and « nowhere in the force majeure provisions does it say that if the contracts are terminated due to an eligible event, the non-terminating party must refund all deposits made. (In a subsequent decision, the court upheld its decision and suggested that the reserving party bring an action for unjust enrichment.) E2W, LLC v. Kidzania Operations, S.A.R.L., No. 1:20-CV-02866-ALC (S.D.N.Y. 2020) (Franchisee invokes force majeure clause in franchise agreement, alleging that government closure orders excuse its payment obligations and the obligation to open an additional franchise location; The court granted the franchisee`s request without justification and forced the parties to maintain the status quo while their arbitration was pending; Parties to the arbitration of claims before the ICC.) (06.04.2020 Appeal; 05.11.2020 Decision on the issuance of a preliminary order; Answer dated 22.05.2020) Sometimes a party may remove a certain type of breach of a force majeure clause. Thus, the contract at issue in In re Hitz Restaurant Group expressly stated that `lack of money is not a ground for force majeure`. In that case, the court ruled that the governor`s order to ban on-site dining was a « government measure, » a recorded force majeure event. The court found that « state action » had replaced the exclusion of « lack of money » and thus partially relieved the debtor of his obligation to pay the rent. The force majeure clause articulates a necessary causal link between the failure to perform and the force majeure event.

In the wording, there is some leeway to express how direct the cause must be. « Caused by », « conditional » or « as a result of » are likely to be understood as expressing a need for immediate cause, while « caused by alone » represents a higher, perhaps insurmountable, burden on the hurtful promiser. In the cases reported so far, the courts have not paid too much attention to whether it was the pandemic, government shutdowns, or general poor economic conditions that caused a promisor`s losses. It is important to note that these distinctions are one of the main reasons why the common law of impossibility and frustration of purpose has proven so inhospitable to parties over the past year, as courts, particularly in the New York mall, declare financial hardship or economic hardship. even if they are caused by an unforeseen event such as COVID-19. will not excuse the performance of the contract under theories of impossibility or frustration. See, for example, Lantino v. Clay LLC, no. 1:18-cv-12247 (S.D.N.Y.

8 May 2020). Like the doctrines of impossibility and impracticability, object deception is applied narrowly and limited to cases where the event that renders the contract worthless is unforeseeable. [20] It has most often been applied by the courts after the death or incapacity of a person necessary for the execution, the destruction or deterioration of an element necessary for the execution, or a change in the law preventing a person from complying. [21] Most contracts contain strict requirements for notice of force majeure, cancellation or termination. Not-for-profit organizations must comply with contract termination requirements to ensure that the measure is legally effective. If you argue that a contract was frustrated or not, you should ask yourself if the event was planned. If this is the case, it is likely that the treaty cannot be thwarted. If this is not the case, you must ask yourself whether the agreed performance is now impossible, whether the agreed object of the contract is now impossible and/or whether the mutually agreed circumstances have changed significantly. [24] In the event that a court rejects such defences, a party who has breached a contract may always invoke the other party`s failure to mitigate its damages as an alternative defence or option to reduce possible damages. See U.S. Bank Nat.

Ass`n v. Ables & Hall Builders, 696 F. Supp. 2d 428, 440-41 (S.D.N.Y. 2010) (« In an action for default, a plaintiff normally has a duty to mitigate the harm suffered. If the plaintiff does not mitigate his damages, the defendant cannot be charged for it. It does not always make economic sense to invoke the frustration of a contract – for example, if the contract is very long-term and contains provisions that are not made impossible by the temporary effects of the current epidemic. Another point to keep in mind is that if the frustration is misnamed, your opposing party may claim an early breach or refusal that could result in termination of the contract and jeopardize a claim for damages. Careful consideration and guidance is needed before frustration is claimed. In contrast to the above-mentioned cases, in Banco Santander (Brasil) S.A.

v. American Airlines, Inc. v. that a Brazilian bank, Banco Santander (Brazil), invoked the impediment of the target in order to survive American Airlines` layoff request after the unintended impact of the pandemic on air travel rendered the parties` contract essentially worthless. Banco Santander`s agreement with American Airlines required the bank to buy a minimum number of miles from the airline each year, and American Airlines, in turn, allowed credit card holders to earn frequent flyer miles through their purchases. When the pandemic broke out, American Airlines temporarily halted flights between Brazil and the United States. Shortly thereafter, the bank brought an action for termination of the contract under the force majeure termination clause or, in the alternative, argued that it was exempt from further performance because of an impediment to the purpose. The court granted the airline`s request to dismiss the bank`s claim on the basis of the force majeure termination clause, but allowed the bank`s lawsuit to survive due to frustration with the objective, as the bank reasonably asserted that the global disruption of the airline industry and the « sharp decline in demand for air travel » – and not only the suspension of American Airlines flights – rendered the agreement worthless.