The COVID-19 pandemic has rendered many contractual obligations difficult, or impossible, to perform. While some businesses have utilized telework technology to continue operations relatively uninterrupted, that is not an option for the sectors of our economy that provide in-person services, such as restaurants, hotels, and others in the hospitality industry. Many businesses will face weeks, if not months, without sufficient revenue or staff to satisfy existing contractual obligations. This is likely to cause a ripple effect of contract defaults affecting vendors, landlords, lenders, and everyone in between.

Of course, the preferred outcome is always to find a workable business solution that avoids unnecessary legal conflict, but sometimes contract disputes are unavoidable. Regardless of whether you are about to default or you expect the other party to default, you may already be exploring what options are available to you during the pandemic. Can you use the emergent nature of present circumstances to avoid your obligations under the contract? Can the other party? What if you already started performing—who covers those costs? These are not easy questions to answer, and you should always consult an attorney regarding your particular situation. However, it is helpful to start by reviewing your contract.

Force Majeure

First, does your contract include a force majeure clause? “Force majeure refers to unforeseen circumstances outside either party’s control that make it impossible to comply with the contract. For example, natural disasters like a hurricane or earthquake, or the outbreak of war, will often be considered a force majeure event. Many contracts attempt to anticipate force majeure events with a clause that specifies whether the event will release the parties from their contractual duties and who is burdened with any resulting costs. Not all force majeure provisions are identical, so analyze the provision closely to determine whether it actually works in your favor. A few specific things to consider:

Michael Rolland is a member of the civil litigation and commercial transactions practice groups with the law firm of Engelman Berger.

• Who does it benefit? Some force majeure clauses apply equally to all parties, but some specifically only apply to one party. A robust force majeure clause will be no help to you if it only excuses the other party from performing.

• When is it triggered? Force majeure provisions typically list the types of events that trigger the clause – i.e., war, weather events, etc. Does your provision include “pandemic,” “state of emergency,” “quarantine,” or something similar as a triggering event? If not, does your provision include “catch-all” language that could include the COVID-19 pandemic, such as “acts of God” or “including but not limited to”?

• Does the triggering event make performance impossible? The person attempting to use the force majeure clause to avoid liability under the contract must generally show that the triggering event actually made performance impossible. If the triggering event merely made it more costly for a party to satisfy their contractual obligations, for example, the force majeure clause likely will not excuse them if they decide not to perform. However, some force majeure clauses use a lower standard than impossibility (for example, by if the contractual obligations become commercially unreasonable).

• Was the triggering event something the parties expected to happen? Force majeure clauses generally only apply if the parties did not know the triggering event had occurred or would occur. Unless you have a magic crystal ball, it is probably a fair assumption that neither party to your contract anticipated the COVID-19 pandemic.

• Is the force majeure clause exclusive? There are other legal principles (described below) that may, under certain conditions, excuse a party from their contractual obligations. However, force majeure clauses presumptively exclude any of those other principles unless the context of the contract indicates it was not meant to exclude other law..

If your contract does not include a force majeure clause, then you may want to consider whether the parties’ legal obligations may be avoidable under the legal doctrines of ‘impracticability” or “frustration of purposes.”

Doctrine of Impracticability

The “doctrine of impracticability,” also sometimes called “the doctrine of impossibility”, is similar to force majeure except that it applies regardless of whether your contract has a force majeure clause.  It may discharge your obligations under the contract if the following criteria are satisfied:

The event happened after you made the contract;

The event is not your fault;

A fundamental assumption of the contract was that the event would not happen;

The event made it impossible for you to perform; and

There are no other circumstances indicating you should still perform.

Traditionally, there are only three events that would satisfy these criteria: (1) death or incapacity of a person necessary for you to perform, (2) destruction of a specific object necessary for you to perform, or (3) a law prohibits you from performing. The third type of event appears to be the most relevant to the COVID-19 pandemic, which has spawned a panoply of stay at home orders, regulatory actions, and other legal restrictions on various business activities.

Doctrine of Frustration of Purposes

The “doctrine of frustration of purposes” differs from the doctrine of impracticability because it applies if unforeseen circumstances have destroyed the expected value of the contract, even when performance is technically still possible.

In Arizona, there are several factors that generally must exist before the doctrine will excuse a party from complying with their contractual obligations:

The event happened after you made the contract;

The event is not your fault;

The event “frustrates” your principal purpose in entering the contract;

Parties sometimes accept some risks under the contract, so the frustration of your purpose must be so severe that it is not part of the risk you accepted under the contract; and

Non-occurrence of the event must have been a basic assumption of the parties when they formed the contract.

All of these concepts are very fact-specific, and will require a careful analysis of the contract language, the purpose of the contract, the obligations and intended benefits of the parties, and how the COVID-19 pandemic has impacted all of these elements. If you find yourself dealing with a breach of contract related to COVID-19, contact your attorney to complete a thorough review of your situation and to analyze the respective rights and obligations of the parties so that you are able to make an informed decision.


Michael Rolland is a member of the civil litigation and commercial transactions practice groups with the law firm of Engelman Berger, P.C. Michael works closely with small business clients, companies and individuals to help them navigate change and find solutions to legal problems that achieve their business goals.  He also has a special interest in technology law. Contact him at or 602.222.4977

Disclaimer: This article is not legal advice and is only for general, non-specific informational purposes. It is not intended to cover all the issues related to the topic discussed. If you have a legal matter, the specific facts that apply to you may require legal knowledge not addressed by this article. If you need legal advice, consult with a lawyer.