Force Majeure Global Update

COVID-19 force majeure (FM) developments extend beyond the United States. In India, the Bombay High Court stated in Standard Retail Pvt. Ltd. v. M/s. G. S. Global Corp & Ors that the temporary nature of the lockdowns meant that the hardship of performance during the COVID-19 pandemic was not a significantly serious reason to excuse contractual obligations.^[1] Similarly, the Delhi High Court in Ramanand and Others v. Girish Soni also rejected a claim for cancellation of rent due to FM, but did grant deferment of rent payment.^[2] In China, the spokesman for China’s legislative authority stated on Feb. 10 that COVID-19 and government actions related to COVID-19 qualify as FM events.^[3] However, on April 16, the Supreme People’s Court of China said that if there is only difficulty, not impossibility, in performance of contractual obligations, the court should support continuing performance and allow amendment of the contract terms upon a party’s request.^[4] In Russia, the Russian Supreme Court issued a set of COVID-19-related clarifications on April 21, granting an exception to the standard FM approach and allowing courts to consider economic hardship caused by government measures adopted in response to COVID-19 as FM.^[5]

Several cases are also proceeding in the United States, a sampling of which are highlighted here. In Lantino v. Clay, the U.S. District Court for the Southern District of New York stated that while the defendant could show financial difficulties due to COVID-19, the economic hardship did not excuse nonpayment of money due under a settlement agreement.^[6] As noted in our COVID-19 Legal Resource Guide Update “COVID-19’s Impact on Contractual Obligations and Force Majeure,” impossibility of performance cannot be established with economic hardship alone.

In the complaint filed in Mon Ethos Pro Consulting v. Zeds Dead, Inc. on March 10, as amended on May 13, in the Superior Court of California, Los Angeles County, the plaintiff argues that the FM clause excuses nonpayment to musicians whose performances had to be canceled due to government lockdown orders. The relevant section of the FM clause at issue states that performance may be canceled by either party if performance is impossible or hazardous or due to governmental or court-ordered laws, regulations, orders or other similar causes beyond the reasonable control of the parties.

In the complaint filed in LFG Acquisitions, LLC v. CSPS Hotel Inc. on May 5, in the Circuit Court for the 13th Judicial Circuit for Hillsborough County, Florida, the plaintiff argues that the FM clause allows for a delay of the closing date on a real estate purchase. The plaintiff seeks a declaratory judgment from the court that COVID-19 is an FM event as contemplated by the purchase agreement. The relevant section of the FM clause states that an extension may be granted if governmental regulations, controls or other causes reasonably beyond such party’s reasonable control prevent performance.

We are tracking ongoing developments in the United States and abroad and will provide updates as they are available. If you have any questions about global COVID-19 FM developments, please contact Harry Rubin, Kevin Moss, Karolina Ebel or Katherine Jeffery.

^{[1] How the Bombay High Court Is Changing Force Majeure Amid COVID-19, Tushar Behl, Jurist, May 14, 2020, https://www.jurist.org/commentary/2020/05/tushar-behl-force-majeure-india-covid19/}

^{[2] Expert Speak | Can Tenants Skip Paying Rent Citing COVID-19 Pandemic? Pawan Jhabak and Salai Varun, The New Indian Express, May 25, 2020, https://www.newindianexpress.com/business/2020/may/25/expert-speak—can-tenants-skip-paying-rent-citing-covid-19-pandemic-2147714.html}

^{[3] China’s Supreme People’s Court Recently Issued Its Judicial Guidance Opinions on Adjudication of COVID-19 Related Cases, Elina Lin, Jingzhou Tao, Mariana Zhong, Dechert LLP, May 13, 2020, https://www.jdsupra.com/legalnews/china-s-supreme-people-s-court-recently-34587/}

^{[4] Id.}

^{[5] Russian Supreme Court Clarifications on COVID-19, Viktor Gerbutov and Anna Fufurina, May 26, 2020, https://www.mondaq.com/russianfederation/litigation-contracts-and-force-majeure/936642/russian-supreme-court-clarifications-on-covid-19}

^{[6] Lantino v. Clay LLC, 2020 U.S. Dist. LEXIS 81474, *5 (S.D.N.Y. May 8, 2020)}