Can I get my pre-paid money back from a tour group because COVID-19 has canceled my tour? Or get my prepaid airline fees back because my flight got canceled because of COVID-19? If I am a restaurateur with a yearlong contract with a food supplier, do I gotta keep paying the supplier for inventory I can’t use when my restaurant is shut down because of COVID-19?
This pandemic has caused the most profound acute worldwide disruption of commerce since at least World War II. Nonperformance or cancellation of contracts, big and small, is present in almost all our lives. So, what is the law regarding nonperformance of a contract caused by some unexpected event?
There is a defense to nonperformance called “force majeure.” It is French for “superior force.” I know, stunning, isn’t it? American law using a foreign word that is not Latin.
With force majeure you must show 1) an unexpected occurrence; 2) you did not assume the risk of the unexpected occurrence when you entered into the agreement; and 3) the occurrence made performance impractical.
Deciding whether an event was “unexpected” and whether you assumed that risk will hinge on what the parties discussed or agreed to in the contract. Lots of agreements may have language that specifically say performance shall be excused if it’s impossible to perform because of strikes, earthquakes, flood, storms, war, riots or — wait for it — epidemics. Maybe the contract says that in those events a finite penalty amount is paid for nonperformance — or maybe a full refund of monies already paid will be given — and the contract otherwise ends.
So, first look to your agreement to see if an event is discussed. You are bound by what the contract says in the event the listed event occurs.
If it was never agreed to in the agreement, the question becomes does the unforeseen event make performance impractical. Under force majeure, you’ve got a good argument to stop paying your food vendor if you can’t use the food inventory you’re supposed to pay for because the government has closed your restaurant.
By the way, on airline ticket refunds, the U.S. Department of Transportation requires airlines to either refund money when a flight is canceled, or offer an alternative route. If the alternative is unsatisfactory to the customer, a refund must be given. This is true even if the cancellation is outside the control of the airline. Thus, if a country is not allowing your flight in, the airline needs to fork the prepaid funds back to you.
Ocean cruises are another pickle. If your liner is allowed to go sail, and your contract with them says nothing about your canceling because of epidemics, you might be on the hook for the prepayment. This might be true even if you are now uncomfortable traveling in close quarters with your fellow humans during this continued pandemic. But force majeure may yet be in your corner because of high-risk health concerns. If the company won’t budge on nonrefund, you can always sue and see what a judge or jury says.
In the coming year, COVID-19 will undoubtedly spread not only the virus, but new court cases involving breach of contract.
Provided the courts are open, of course.
Face masks, anyone?