Switch to ADA Accessible Theme
Close Menu

Is Covid-19 an “Act of God” Excusing Performance of a Contract?

Contract8

Florida courts have long recognized that “acts of God” may provide a legal justification for nonperformance of a contract. What constitutes an “act of God,” however, evades precise definition. The Florida Supreme Court has described an “act of God” for purposes of a contract as follows:

An act of God, such as will excuse nonperformance of a legal contract, must be an act or occurrence so extraordinary and unprecedented that human foresight could not foresee or guard against it, and the effect of which could not be prevented or avoided by the exercise of reasonable prudence, diligence, and care or by the use of those means which the situation of the party renders it reasonable that he should employ. It must be the sole proximate cause of the nonperformance, without the participation of man, whether by active intervention or negligence or failure to act. When performance becomes impossible by reason of contingencies which should have been foreseen and provided against in the contract, the promisor is held answerable.[1]

The Florida Supreme Court has held, for instance, that a hurricane knocking out power service was an “act of God” and justified the power company’s inability to perform a contract to deliver electric service.[2] In fact, hurricanes are a typical example of an “act of God,”[3] though whether the strength of the storm is one that “no reasonable preparations would have prevented” performance of the contract is an issue of fact.[4] In other words, a hurricane is not an automatic excuse for nonperformance of a contract, and whether it serves as an excuse will depend on the non-performing party’s preparation for the storm.

While hurricanes are a perennial issue for Floridians, global pandemics of disease are not. Many (including your author) wonder whether Covid-19 is an “act of God.” The answer is murky, but cases arising out of influenza outbreaks in the late 19th and early 20th century offer some guidance, though these cases arise in the context of labor disputes.

In Lakeman v. Pollard,[5] the Supreme Judicial Court of Maine addressed a pay dispute between a worker and a mill owner in 1857. The worker worked for half of the season but quit due to a cholera outbreak nearby. The mill owner claimed that the worker breached his contract by not working the entire season. The worker claimed that the cholera outbreak was an “act of God” preventing full performance. The court decided that the “plaintiff was under no obligation to imperil his life by remaining at work” in the face of a cholera outbreak, but his decision “must be determined by examining the state of facts as then existing.”[6] Because the jury concluded that a “man of ordinary care” would have been justified in leaving, the court affirmed the judgment in favor of the worker.

In Gear v. Gray,[7] the Indiana Appellate Court faced a similar situation involving a teacher seeking unpaid wages. The teacher contracted with the local school to teach for 32 weeks. Twenty-eight weeks into the school year, however, the county board of health closed the school due to an outbreak of diphtheria and refused to pay the teacher for the final four weeks. In contrast to the court in Lakeman, the court concluded that “the closing of a school by the order of a school board or a board of health is not the act of God, however prudent and necessary it may have been to make such an order.”[8] Courts in Illinois[9] and Michigan[10] reached similar conclusions, i.e., that closing school due to disease is not an “act of God.”

Notwithstanding these school cases, the picture remains murky. In Sandry v. Brooklyn School District No. 78,[11] the North Dakota Supreme Court considered the case of a school bus driver whose contract to transport students to school was cut short by an outbreak of influenza. The school board refused to pay the bus driver for the period while school was closed. While acknowledging that a teacher should be paid while school was closed, the court concluded that a driver is not of the “same character” as the teacher, such that the school closure was an “act of God” preventing full performance. Rightly or wrongly, the distinction appears to rest on the fact that teachers are professionals hired from outside the school district, while bus drivers are not.

So where does this leave us today? The question of whether the Covid-19 outbreak would qualify as an “act of God” appears to be an open question – especially here in Florida, where the courts do not appear to have addressed whether disease may render the performance of a contract impossible.

One should note, however, that the “act of God” rule excusing performance is a default rule. The modern trend in contracts is to include a so-called “force majeure” clause, a clause that addresses unforeseen events and allocates that risk between the parties. A force majeure clause may, for instance, excuse one party’s performance for an event beyond its control – foreseeable or not – even when it does not render performance of the contract unenforceable.[12] A force majeure clause may specifically address what happens in the event of an “epidemic” or a “quarantine.” (Whether Governor DeSantis’s executive orders declaring a state of emergency and limiting certain activities constitutes a “quarantine” is beyond the scope of this analysis.)

If you have concerns about a specific contract and the effect of the Covid-19 outbreak on it, give us a call.

 

[1] See, e.g., Fla. Power Corp. v. City of Tallahassee, 18 So. 2d 671, 675 (Fla. 1944) (discussing “acts of God”).

[2] Id.

[3] See Skandia Ins. Co., Ltd. v. Star Shipping AS, 173 F. Supp. 2d 1228, 1239-40 (S.D. Ala. 2001) (applying federal admiralty law).

[4] See Bunge Corp. v. Freeport Marine Repair, Inc., 240 F.3d 919, 926 (11th Cir. 2001) (applying federal admiralty law).

[5] 43 Me. 463 (1857).

[6] Id. at 467.

[7] 37 N.E. 1059 (Ind. App. Ct. 1894).

[8] Id. at 1061.

[9] Phelps v. School Dist. No. 109, 221 Ill. App. 500 (1921).

[10] Dewey v. Union Sch. Dist., 5 N.W. 646 (Mich. 1880).

[11] 182 N.W. 689 (N.D. 1921).

[12] Home Devco/Tivoli Isles LLC v. Silver, 26 So. 3d 718, 722 (Fla. 4th DCA 2010) (noting “that force majeure clauses broader than the scope of impossibility are enforceable under Florida law”).

Facebook Twitter LinkedIn