FORCE MAJEURE- French for superior force

As you can imagine, the COVID19 pandemic has reeked havoc on contract disputes and law. Consider this case out of New York:

On December 16, 2020, Judge Denise Cote of the Southern District of New York found that COVID-19 qualifies as a "natural disaster" excusing a contractual counterparty's nonperformance under aforce majeureprovision. The plaintiff inJN Contemporary Art LLC v. Phillips Auctioneers, LLC, (S.D.N.Y. 2020) had entered into an agreement with an auction house (the defendant), pursuant to which the auction house agreed to hold an in-person event in May 2020 to sell the plaintiff's artwork and guaranteed that the plaintiff would receive at least $5 million in sales proceeds. In March 2020, following governmental shutdown orders, the auction house postponed the event until June. Come June, the auction house terminated the agreement, in part on the basis that the economic conditions brought on by the pandemic would prevent it from realizing any profit on the sale, after paying the guaranteed amount to the plaintiff. The plaintiff filed suit for breach of contract shortly thereafter; the auction house moved to dismiss, arguing termination was permitted under the agreement'sforce majeureprovision, which provided:

In the event that the auction is postponed for circumstances beyond our or your reasonable control, including, without limitation, as a result of natural disaster, fire, flood, general strike, war, armed conflict, terrorist attack or nuclear or chemical contamination, we may terminate this Agreement with immediate effect. In such event, our obligation to make payment of the Guaranteed Minimum shall be null and void and we shall have no other liability to you.

The Court found for the auction house on two theories:

1. First, Judge Cote reasoned that COVID-19 and the attendant government-imposed restrictions on business operations were exactly the type of circumstances beyond the parties' control envisioned by theforce majeureclause.
2. The Court then went on to find that, not only was COVID-19 covered by the catch-all language, but that it was also covered by the specifically enumerated event of a "natural disaster." Noting that neither the New York Court of Appeals nor the Second Circuit Court of Appeals has addressed "whether the COVID-19 pandemic should be classified as a natural disaster, the Second Circuit has identified 'disease' as an example of a natural disaster." A "natural disaster," the Court further explained, is defined as "[a] natural event that causes great damage or loss of life." The Court concluded "[i]t cannot be seriously disputed that the COVID-19 pandemic is a natural disaster." The Court noted that governmental proclamationsincluding Governor Cuomo's Executive Orders declaring COVID-19 a "State disaster emergency"supports this reading of the contract.

Litigants inforce majeurecases currently pending across the country are likely to take note of the Court's reasoning inJN Contemporary Art, as are any parties currently revisiting theforce majeureclauses in their own commercial contracts.

Do you think a global pandemic should be considered like a natural disaster? Have you ever heard the termforce majeurebefore, and now that you have and understand what it means, should courts be able to essentially cancel contracts because offorce majeureclauses? What if there is not aforce majeureclause in the contract?