Does Force Majeure Clause Protect Debtor During Covid Epidemic in Florida

Across Florida, small businesses, business owners, and unemployed individuals will experience financial hardship because of the Covid Virus (COVID-19) . Many individuals are concerned about their ability to pay financial obligations such as credit card bills, mortgage payments, and bank loans. Some people will ask whether the unforseeability of the Colvid virus excuses their inability to pay debts when due.

Some legal contracts contain what are known as “force majeure” clauses that excuse either party’s inability to pay or perform due to unforeseen circumstances beyond a party’s control. Florida law defines a force majeure clause as a contractual provision changing or excusing payment or performance made impossible or impracticable, especially because of an event that the parties could not have reasonably anticipated. In the past, force majeure events have included wars, weather disasters, terrorism, and government action.  The classification of Covid by the WHO as a pandemic means that courts will likely consider the virus to be a force majeure.

In some other states courts recognize common law defenses such as the doctrine of “frustration of purpose” or “impossibility of performance”. Florida law has no “common law” defense to inability to pay a debt caused by an unforeseen outside event equivalent to a force majeure.  There is no Florida force majeure statute. Therefore, a Florida debtor my invoke a force majeure defense for non-payment only if a force majeure provision  is included in the contract with the creditor, and the force majeure contract provision, if any, does not exclude viral outbreaks..

Typical credit card agreements, residential leases, and home mortgages do not have force majeure provisions. Contracts that are silent on pandemics or other viral outbreaks will be insufficient to sustain ana force majeure defense to non-payment. Some commercial loans and commercial leases include force majeure excuses. Force majeure provisions are more often included in performance agreements such as construction contracts, especially contracts with time deadlines for performance.

If your agreement with your creditor includes a force majeure clause the enforcement of the clause is governed by Florida court decisions. Florida courts have said that each particular contract’s force majeure language governs the definition of force majeure and the enforceability of the force majeure defense between parties to the contract. Whether a debtor can effectively assert a force majeure defense will involve a detailed inquiry into the force majeure language found within the contract with the creditor.

Most contract definitions of force majeure characterize force majeure events as being beyond the control of either party, and performance must be literally impossible or impractical. An  example is a government regulation or law that makes illegal an act that a party is contractually obligated to perform.  Payment of debt is not beyond a debtor’s control where the government does not make payment impossible such as by closing your bank or denying access to your money. Second, Florida courts have held that changes in world events that change the profitability or financial consequences of a contract do not constitute force majeures that excuse non-payment or non-performance. Contract parties assume and bear consequences of their own subjective decision of  inability to perform.

Some previously signed commercial contracts and debt agreements may include force majeure excuses for non-payment. The Covid virus will not constitute a force majeure excuse for non-payment of credit card, mortgage, or residential tenant debt in Florida. People likely will pay much more attention to force majeure language in future legal contacts Subsequent to resolution of the Covid virus.

Across Florida, small businesses, business owners, and unemployed individuals will experience financial hardship because of the Covid Virus (COVID-19) . Many individuals are concerned about their ability to pay financial obligations such as credit card bills, mortgage payments, and bank loans. Some people will ask whether the unforseeability of the Colvid virus excuses their inability to pay debts when due.

Some legal contracts contain what are known as “force majeure” clauses that excuse either party’s inability to pay or perform due to unforeseen circumstances beyond a party’s control. Florida law defines a force majeure clause as a contractual provision changing or excusing payment or performance made impossible or impracticable, especially because of an event that the parties could not have reasonably anticipated. In the past, force majeure events have included wars, weather disasters, terrorism, and government action.  The classification of Covid by the WHO as a pandemic means that courts will likely consider the virus to be a force majeure.

In some other states courts recognize common law defenses such as the doctrine of “frustration of purpose” or “impossibility of performance”. Florida law has no “common law” defense to inability to pay a debt caused by an unforeseen outside event equivalent to a force majeure.  There is no Florida force majeure statute. Therefore, a Florida debtor my invoke a force majeure defense for non-payment only if a force majeure provision  is included in the contract with the creditor, and the force majeure contract provision, if any, does not exclude viral outbreaks..

Typical credit card agreements, residential leases, and home mortgages do not have force majeure provisions. Contracts that are silent on pandemics or other viral outbreaks will be insufficient to sustain ana force majeure defense to non-payment. Some commercial loans and commercial leases include force majeure excuses. Force majeure provisions are more often included in performance agreements such as construction contracts, especially contracts with time deadlines for performance.

If your agreement with your creditor includes a force majeure clause the enforcement of the clause is governed by Florida court decisions. Florida courts have said that each particular contract’s force majeure language governs the definition of force majeure and the enforceability of the force majeure defense between parties to the contract. Whether a debtor can effectively assert a force majeure defense will involve a detailed inquiry into the force majeure language found within the contract with the creditor.

Most contract definitions of force majeure characterize force majeure events as being beyond the control of either party, and performance must be literally impossible or impractical. An  example is a government regulation or law that makes illegal an act that a party is contractually obligated to perform.  Payment of debt is not beyond a debtor’s control where the government does not make payment impossible such as by closing your bank or denying access to your money. Second, Florida courts have held that changes in world events that change the profitability or financial consequences of a contract do not constitute force majeures that excuse non-payment or non-performance. Contract parties assume and bear consequences of their own subjective decision of  inability to perform.

Some previously signed commercial contracts and debt agreements may include force majeure excuses for non-payment. The Covid virus will not constitute a force majeure excuse for non-payment of credit card, mortgage, or residential tenant debt in Florida. People likely will pay much more attention to force majeure language in future legal contacts Subsequent to resolution of the Covid virus.

If force majeure defense is not available some business owners will consider claims under existing business interruption insurance. Business interruption policies typically insure consequences of physical property damage from unforeseen events such as fires or transportation disruption. The policies generally cover lost revenues and fixed expense such as rent and utilities. However, after the SARS outbreak ins 2002 most insurers specifically excluded viral outbreaks from standard business interruption polices.

If a force majeure defense is not available some business owners will consider claims under existing business interruption insurance. Business interruption policies typically insure consequences of physical property damage from unforeseen events such as fires or transportation disruption. The policies generally cover lost revenues and fixed expense such as rent and utilities. However, after the SARS outbreak ins 2002 most insurers specifically excluded viral outbreaks from standard business interruption polices.