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International Sales Contracts - COVID-19 Pandemic and Force Majeure

Q: What is force majeure in the context of a contract?

A: Generally speaking, a force majeure clause is a contract provision that relieves a party from performing its contractual obligations when certain circumstances beyond its control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.

Q: If a party enters into an international commercial contract and the COVID-19 pandemic has prevented or delayed performance by such party, is such party excused from performing?

A: It depends. Does the contract for sale of goods stipulate that the United Nations Convention on Contracts for the International Sale of Goods (“CISG”) is the determinative governing law, or, by default the CISG governs?

The CISG generally applies if the parties to a contract are from different signatory countries (unless the parties expressly waive its applicability), or when private international law provisions default to the CISG. The United States is a signatory country to the CISG.  Specifically, CISG Article 79 provides that “[a] party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it, or its consequences.” The treatment of impediment under the CISG is different from the treatment under common law (see below). Generally, four conditions must be satisfied in order for a party to assert the force majeure protection under the CISG. First, the impediment must be beyond the party’s control. Secondly, the impediment is unforeseeable at the time the contract was signed (thus, a party probably would not prevail in court if it enters into a contract today and claims that it cannot perform under the contract due to the COVID-19 pandemic). Thirdly, the impediment and its consequences could not be reasonably avoided or overcome. Lastly, the non-performance of the party is the result of the impediment.  

Q: What if the contract does not contain an express force majeure clause or the CISG does not apply to the contract?

A: Consider other options under U.S. law to excuse non-performance.

Under Article 2 of the Uniform Commercial Code (“UCC”) (Section 2-615), a seller may be excused from delay or non-delivery of the goods if performance “has been made impracticable” by either (i) the occurrence of an event “the nonoccurrence of which was a basic assumption on which the contract was made” or (ii) good faith compliance with foreign or domestic government regulation. Can the COVID-19 pandemic and/or compliance with the governmental health orders be used to excuse performance under the UCC? Perhaps, but analysis should be done on a case by case basis.

The common law doctrines of “frustration” and “impossibility” may be invoked, but they have higher thresholds to overcome. Additionally, states in the U.S. apply different treatments of these concepts.

Some jurisdictions focus on whether the impossibility of performance was foreseeable at the time the contract was entered. Additionally, the contract must be consummated based on the assumption that the event (which rendered performance impossible) would not occur. Some states expand the impossibility defense to include the doctrine of impracticability (see the UCC discussion above).

The doctrine of “frustration of purpose” generally provides where the breaching party finds that the purposes for which it bargained have been frustrated to the extent that the breaching party is not receiving the benefit of the bargain for which it contracted; i.e., the frustration destroyed the purpose of the contract. Some jurisdictions also require that an event resulting in such frustration of purpose is unforeseeable and beyond the parties’ control.

If you have any questions about force majeure, please contact Robert Q. Lee at rqlee@bmdpl.com or 407.232.6881.

Changes to Physician Assistant Statutes in Florida

In the last year, there have been many changes to the scope of practice and collaboration/supervision requirements for advanced practice providers such as APRNs and physician assistants in the state of Florida. In a previous Client Alert we discussed House Bill 607, which expanded the autonomous practice of APRNs providing primary care services in Florida.

Ohio Senate Bill 49 – Ohio Expands Lien Rights for Design Professionals

Effective September 30, 2021, Ohio granted limited lien rights to design professionals, including architects, landscape architects, engineers, and surveyors. Ohio Governor Mike DeWine signed Senate Bill 49 into law on July 1, 2021. This new law established a statutory right to lien commercial real estate by Ohio design professionals who, until now, could not file a lien for non-payment of professional services. Senator Vernon Sykes, a primary sponsor of Senate Bill 49, stated that the “legislation ensures that architects, engineers and other designers will get paid for their work, regardless of the outcome of their projects . . . It will support hardworking Ohioans by protecting the value of their labor . . ..”

Primary Care Practice Officially Defined in Florida for APRNs Practicing Autonomously

As many providers in Florida are aware, House Bill 607 (the “Bill”), which was passed in February of last year, gives certain APRNs in Florida the ability to practice autonomously. The only catch is that they must work in primary practice. When the Bill was initially passed, there was question as to what was exactly considered primary care, absent a definition from the Florida Board of Nursing. However, as of February 25, 2021, “primary care practice” has officially been defined.

Part II of the No Surprises Act

The Department of Health and Human Services (“HHS”) published Part II of the No Surprises Act on September 30, 2021, which will take effect on January 1, 2022. The new guidance, in large part, focuses on the independent dispute resolution process that was briefly mentioned in Part I of the Act. In addition, there is now guidance on good faith estimate requirements, the patient-provider dispute resolution processes, and added external review provisions.

Safer Federal Workforce Task Force - Guidance for Federal Contractors and Subcontractors

The Safer Federal Workforce Task Force has issued its Guidance for Federal Contractors and Subcontractors (Guidance). Note that the Guidance applies only to “covered contracts,” which are contracts that include the clause (Clause) set forth in Sec. 2(a) of Executive Order 14042 (Ensuring Adequate COVID Safety Protocols for Federal Contractors). The Federal Acquisition Regulatory Council (FARC) is to conduct rulemaking and take related action to ensure that the Clause is incorporated into federal contracts. Until that happens, federal contractors likely will not see the Clause in its contracts. Following is a broad summary of the Guidance.