Does ‘Fine Print’ on COVID-19 Allow Contract Cancellation?

Attorney Mark Alexander (right) with his son Pete in a previous Spartan Race.

Earlier this year I convinced some friends to sign up with me to do a “Spartan Race” in April. However, due to the pandemic, the race was canceled. So, do my friends and I get our money back or not? The answer will most likely depend on the “Terms and Conditions” that we too often overlook and simply click – “Agree”.

According to the “Terms and Conditions” we “accepted” on our phone when signing up for the race, we had agreed to a “No Refund Policy” in case of “exceptional circumstances.” Fortunately, despite the official “Terms and Conditions,” the Spartan folks sent us a code that will allow us to sign up for a new race next year. Others with much more significant agreements, leases, and contracts, however, have not been as fortunate during these unprecedented times.

The pandemic and its surrounding circumstances have caused many people and businesses to go back and review the fine print of their contracts and agreements. The provision that usually controls how COVID-19 will impact the contracting parties’ obligations is the often ignored force majeure clause, meaning supreme or superior force. This is a provision in the contract that excuses the parties’ performance under certain circumstances and determines who will assume the risk if performance cannot be completed. The last time force majeure clauses were in vogue was after the September 11, 2001 attacks, when airlines limited travel and events were cancelled. Before the 2020 pandemic, people rarely paid much attention to these provisions.

Typically, a force majeure clause lists the circumstances or specific events that result in performance being excused, such as an act of God, nuclear or natural catastrophes, or acts of terrorism or war. Some contracts have generic catchall phases such as “or other causes reasonably beyond the parties’ control.” Some may feel this generalized language is sufficient to cover COVID-19 related cancellations. However, the mere fact that performance of a contract may be economically difficult does not necessarily render the contract impossible or excuse its performance. With that said, many of the recent shelter-in-place and other COVID-19 related government orders prohibiting certain gatherings may have rendered the performance of some contracts impracticable, if not impossible.

Until recently, force majeure clauses rarely specified an epidemic or pandemic as an event that would relieve someone of their contractual obligation. As a result, large areas of “gray” exist and are still developing in this area of the law. Given this uncertainty, parties are generally encouraged to try to work through these exceptional circumstances themselves and develop creative alternatives to disputes and/or litigation. Strict adherence to rigid “Terms and Conditions” may not be the best practice. For example, I am looking forward to next year’s Spartan Race with friends, and I appreciate the race organizers providing us the opportunity. If, however, you have a circumstance where you need, or would like, more information on this issue, the lawyers of Stewart, Melvin & Frost are available to help you.