Businesses are worried about whether the COVID-19 pandemic will make it impossible for them to perform the agreements they made before the pandemic. With each month approaching, landlords are also pondering whether rent checks will arrive in time. California is a prime example of this dilemma, as Governor Newsom issued a stay-at-home order on March 19, which had a significant impact on all businesses and on the rapidly disappearing retail space.
- Even though the government has already enacted the $2 trillion stimulus package, and included in it federal funding programs to assist both small and large businesses, you should still consider the terms of all contracts.
- First, you should carefully read your agreements, particularly your commercial/retail lease. If there is a “Force Majeure”, make sure to understand how it may affect one party’s ability to perform a contract.
- California has this beginning law. It has been in existence for almost 150 years. It is simply called “Causes exempt performance” and is found in California Civil Code (SS1511).
Added to the analytic mix are additional principles of California contract law, specifically legal doctrines that further operate to excuse performance called “impossibility/impracticability” and “frustration of purpose”. The first allows contract performance to be exempted if it is not possible or would incur an unreasonable and excessive expense that was not contemplated in the contract.
Summarized from an article by Stubbs, Alderton & Markiles, LLP.
