Can You “Get Out” of Your Contract?

Get Out of Contract

Whether you have signed a lease agreement, vendor contract, or some other type of agreement, you may be wondering if you can now “get out” of the contract due to the COVID-19 pandemic.

Here are some possible defenses in your favor:

  1. Force Majeure – Read your contract to see if it contains a Force Majeure clause, which excuses performance (for a period of time) due to an event beyond your control such as an “act of god”.  The argument could be made that the pandemic qualifies as an act of god, however this still needs to be tested in the courts.
  2. Impossibility – If there is no Force Majeure clause, you may be able to rely on the doctrine of “impossibility”. A party’s performance under a contract may be excused when the subject matter is destroyed due to no fault of the party.  Typically, the subject matter must be permanently destroyed—so, if your performance is only delayed (not destroyed), it may be difficult to rely on the defense of impossibility.
  3. Frustration of Purpose – This occurs when performance under the contract remains possible, but an unforeseen event has undermined the value of the contract.  However, if your performance has merely become inconvenient or more expensive due to the unforeseen event, this will not be sufficient enough for you to rely on “frustration of purpose” as a defense.

Please keep in mind that COVID-related lawsuits are in their infancy.  It will take some time to see whether, and under what circumstances, the courts are ruling in favor of parties who assert these defenses.

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