Can Impracticable Contracts be Forced Upon You?
Conducting business in the wake of COVID-19
Given the affects the COVID-19 virus is having on businesses across the globe, businesses are looking for ways to get some economic relief and some certainty. Many times, we can help with negotiating agreements that will give our clients some room to breathe. Part of that process involves looking at the applicability of and asserting certain legal doctrines that apply to contracts. To start we look to see if a contract has force majeure provisions. We help determine if the UCC defense of impracticability can apply. Keep in mind, other doctrines and defenses may be available due to the unexpected events caused by COVID-19.
A force majeure provision in a contract addresses the effect of unforeseeable events that might excuse non-performance by one or more parties to a contract. Recently in Haverhill Glen, LLC v. Eric Petroleum Corp., 2016-Ohio-8030, 67 N.E.3d 845, (App. 7 Dist. 2016) the Court wrote:
“Generally, force majeure is a term from the French law and literally means a superior force. It is commonly defined as an event or effect that can be neither anticipated nor controlled. Black’s Law Dictionary 673-674 (8th Ed.2004).” To use a force majeure clause as an excuse for nonperformance, the nonperforming party bears the burden of proving that the event was beyond the party’s control and without its fault or negligence.” Stand v. Energy Corp. v. Cinergy Servs., 144 Ohio App.3d 410, 416, 760 N.E.2d 453 (1st Dist.2001). This is a relatively new concept in Ohio law.
Force majeure has been characterized by courts as a defense that has some overlap with the common law defenses of impossibility or impracticability. See Great Lakes Gas Transmission Ltd. v. Essar Steel Minn., LLC, 871 F.Supp.2d 843, 856 (D. Minn. 2012). However, ultimately courts must look to the language of the contract’s force majeure provision to determine its applicability.”
Many consumer contracts are covered by the Ohio Uniform Commercial Code (the “UCC”). An important part of the UCC addresses what the parties to a contract ‘s obligations are in the event the performance of the contract becomes “impracticable”. In other words, impracticability can become a defense to the party that cannot perform on the contract.
The Ohio UCC defines the impracticability defense at ORC 1302.73.
Whether a party invokes the protections of a force majeure clause or asserts the impracticability defense (or both in certain situations) that party will bear the burden of proof. Different notice periods apply, and different criteria must be established. At Lardiere McNair we can help you navigate these issues. If you have questions about a contract or other business concerns, we provide free 45-minute initial consultations.
Chad Stonebrook is a partner at Lardiere McNair, LLC. To read more about our firm, please visit lawyerscolumbusohio.com.
Lardiere McNair is aware of the Ohio Department of Health’s Stay at Home Order. LM has been deemed an essential business and will continue to operate. We are available for meetings via phone or video, as well as email. In these uncertain times, please give us a call to protect you, your family, or your business.
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