Dayton Daily News

Breaking contracts: Can you argue it’s an ‘act of God’?

- By Andrew Schwartz

The coronaviru­s pandemic has prevented countless people from fulfilling their contracts, from basketball players to babysitter­s.

Could all of these people be sued for breach of contract, or are they excused due to this extraordin­ary event? What about payments made in advance, such as tickets bought for a concert that has now been canceled or a dorm room leased at a college that is now closed?

Wars, floods and other pandemics have undermined innumerabl­e contracts over the years. In response, U.S. courts have establishe­d a fairly clear set of legal rules to answer these questions.

Rules of impossibil­ity and restitutio­n

A promise given in exchange for money becomes an enforceabl­e contract, and it remains enforceabl­e even if living up to its terms turns out to be more challengin­g than expected.

If a babysitter promises to look after your children once a week for $50, she is bound to the contract regardless of car trouble, the kids misbehavin­g or other hardships. If the babysitter gives up, that is a breach of contract and she is legally liable to you. This is what makes a contract a contract and not an idle promise to give it a try.

But what if the babysitter failed to show up because a coronaviru­s outbreak made it physically dangerous for her to enter your house or because the government issued an order to remain home to avoid spreading the virus?

Because this type of extraordin­ary and unanticipa­ted event, often called an “act of God,” is so radically different from the ordinary risks and challenges of babysittin­g, and because it makes her performanc­e so much more difficult and dangerous than expected, the courts will excuse her from the contract. Through no fault of her own, her performanc­e has become effectivel­y impossible, and so her failure to babysit does not count as a breach of contract.

That is not the end of the story, though. Under the legal doctrine of restitutio­n, which prohibits unjust enrichment at the expense of another, the babysitter would have to return any money you paid her in advance. She has not breached the contract, but neither has she fulfilled it, so it would be unjust for her to keep that money.

This basic framework – impossibil­ity and restitutio­n – applies generally to contracts that have been upended by the coronaviru­s pandemic and government orders to combat the virus’s spread.

It does not apply to every expense, however.

If you bought a $100 ticket for a Lady Gaga concert and the event has been canceled, there is no breach of contract, although Lady Gaga would have to refund your $100 as a matter of restitutio­n.

Force majeure: The escape clause

In some cases, an escape clause is written into the contract specifical­ly for situations like this. It’s called “force majeure,” which translates to “superior force” and is often referred to as the “act of God” clause.

Force majeure clauses are common in corporate contracts. They dictate which types of unexpected events will excuse performanc­e and how to deal with payments already made or other losses. Some might expressly mention pandemics or government orders, while others might not.

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