Good friends just cancelled – well, postponed – their wedding. Because of Covid-19 restrictions, they are unable to hold a gathering of more than 25 people, and they had invited several hundred family members and friends to their wedding. Amidst their own disappointment at postponing their celebration, they have also had to deal with contracts with the venue, the photographer, the caterer, and the hotels where we were all scheduled to stay. They have been fortunate; everyone has been flexible and agreed to perform in a year. So, their renegotiation was easy and straightforward.

But that has not been true for many others whose plans have been disrupted by the pandemic. 

In fact, many people are fighting quite bitterly about all kinds of contracts, ranging from weddings to conferences to leases to factory output.

What will happen to all of these contracts? 

It turns out that we can’t be sure, explain Cathy Hwang, who teaches at the University of Virginia Law School, and David Hoffman, who teaches at the University of Pennsylvania Carey Law School, in a new paper.

There is “shockingly little” existing law that offers a guide, according to Hwang.  Courts generally enforce contracts as they are written: if you agree to pay for a certain service, you are responsible for making that payment. And, as a general matter, we want contracts to be enforceable, so that if you have paid a conference fee and a hotel room deposit, you want to be able to attend the conference and stay in that hotel room during the agreed-upon dates. 

During a pandemic, however, large gatherings of people have become super-spreader events, and, even if the conference hasn’t been cancelled, you may not want to attend. But you also want your money back.

As the authors out, there are a few ways for someone to get out of performing a contract. For example,  a “force majeure” clause can prevent enforcement in certain limited circumstances that are beyond the parties’ control. While it seems as though the unforeseen and major disruptions caused by Covid-19 would qualify, that’s debatable. First, force majeure clauses are interpreted narrowly; and second, pandemics could actually be deemed to be foreseeable, given that we’ve had a number of them over the past century.

And those past pandemics provide a limited guide on how courts might treat a contract today. Hwang and Hoffman found a case from 1916, where Walter Hanford sued the Connecticut Fair Association for breach of contract after the association canceled a baby pageant (apparently similar to a dog pageant) because of an outbreak of polio in New York. Although the contract was clear that the Connecticut Fair had to pay to promote the baby pageant, a court refused to force the Fair to go forward because of  The defendant’s obligation to pay was absolute and unqualified. However, a court refused to award damages or force the event to go on, because it would be “highly dangerous to health.” 

Hwang and Hoffman note that there have been similar cases about the importance of preserving public health during almost every other epidemic over the past 200 years.  That doesn’t mean that courts today will do the same thing, however.

Their advice is to do precisely what my friends did: try to renegotiate. A common sense approach, they point out,  is not to “wave a contract in someone’s face and demand that they pay you,” but to try to figure out a way for each side to minimize their damages. They predict that after the pandemic, individual cases are likely to get lumped together or forced into arbitration, “which means you’re going to get a pretty unsatisfying settlement (and a lot of heartache and expense, too).”

 So, try to extend the contract, postpone performance, share the losses — just do whatever you can to stay out of court and keep a good relationship with the other side. You want to be able to do a happy dance at your wedding, after all.

Forbes

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