The news is littered with reports of Coronavirus outbreaks and quarantines. With around the clock news coverage comes the alarm, panic and overreaction. Times like these may remind us that contracts may have to plan for the unexpected.
Force majeure, literally translated as superior force, is used legally to describe an unforeseeable circumstance beyond anyone’s control that prevents a party from performing under a contract. A force majeure clause in a contract protects the parties from being in breach of the contract if the breach was the result of, or due to, a defined force majeure event which made performance impracticable, inadvisable or impossible. Typically, a force majeure clause protects the parties from the time of the triggering event to the time the force majeure ends. In other words, it is not an excuse to never perform under the terms of the contract, but rather to not perform during the force majeure.
In the Washington, DC Metro area, it is not uncommon for REALTORS® to work with clients who are overseas or travel extensively. It is, therefore, not out of the realm of possibility that certain parties to a contract may for one reason or another be unable to perform on the settlement date because of consequences or measures to deal with the spread of the Coronavirus.
In fact, as the story of the Coronavirus unfolds here in the United States, it is possible that a party to a real estate contract in the U.S. may not be able to perform on the settlement date. For example, if after contract ratification, the buyer contracts the virus and is quarantined for a time period that runs beyond the contractually agreed upon settlement date, a properly worded force majeure clause would excuse performance under the contract until the quarantine ended.
While there is no form language in the Virginia Residential Sales Contract, REALTORS® may see contracts that are submitted by sophisticated parties or clients who hired attorneys that contain a force majeure clause. In such an event, don’t panic (see what I did there); simply advise your clients to hire a lawyer if they have questions or concerns.