Force majeure provisions are top of mind for many businesses today because of the pandemic of SARS-CoV-2, which causes the novel coronavirus disease called COVID-19. “Pandemics” are typically not specified in general commercial contract force majeure clauses, but “acts of God” are, along with a series of other bases for contract relief. This article provides a brief overview of two largely overlapping arguments potentially available to those seeking to excuse performance under a commercial contract governed by Georgia law due to COVID-19 when there is no contractual provision specifying “pandemic,” “epidemic,” or the like: (1) under the “act of God” provision that may exist in a contract and (2) under the “act of God” defense to a breach of contract action which is provided for under Georgia law, O.C.G.A. § 13-4-21.
Contractual Force Majeure Provision—“act of God”
An “act of God” provision, frequently included in a force majeure clause, sets forth conditions that, if triggered, permit parties to take actions under a contract, which may include suspending performance or even terminating the contract. (The scope of any relief provided under such clauses is dictated by the terms of the contract.) The items typically included in a force majeure clause, other than “act of God,” tend to be human-caused, for example, strikes, war, government or state action, etc. Without inclusion of an item akin to “pandemic,” contracting parties seeking to suspend or avoid performance of their contractual obligations are likely to look to “act of God” as a savior. But the Georgia case law on what constitutes an “act of God” is silent with respect to whether a pandemic counts as one. And, not all “act of God” provisions are equal; some by their terms expressly or contextually limit qualifying acts of God (e.g., to weather-related events).
Although the Georgia case law is silent with respect to whether pandemics or viral outbreaks constitute an “act of God,” principles guiding the “act of God” jurisprudence suggest that when these cases wind their way through the courts, we will see a patchwork of judicial decisions and jury verdicts. SeeUniroyal, Inc. v. Hood, 588 F.2d 454, 460 (5th Cir. 1979) (applying Georgia law) (“Whether a particular casualty is an act of God is a mixed question of law and fact. ‘The defining and limitation of the term, its several characteristics, its possibilities as establishing and controlling exemption from liability, are questions of law for the court; but the existence or non-existence of the facts on which it is predicated is a question for the jury.’” (quoting Goble v. Louisville & Nashville Railroad Company, 187 Ga. 243, 251 (1938))). This is because the case law outlines that an act of God must not be human caused, and it must not be reasonably predictable or avoidable. The facts of the COVID-19 pandemic lend themselves to argument under this test. We predict that until the Georgia Supreme Court provides clarity (or the Georgia General Assembly does so via legislation), the unique words of such clauses, the facts at issue in particular cases, and the admitted variability of judicial analysis will render this messy terrain for businesses.
Many Georgia cases describe an “act of God” as something caused by nature, for example, “‘[a]n overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado.’” Elavon, Inc. v. Wachovia Bank, Nat. Ass’n, 841 F. Supp. 2d 1298, 1306 (N.D. Ga. 2011) (quoting Black’s Law Dictionary (9th ed. 2009) (applying Georgia law). “‘The term “act of God” in its legal sense applies only to events in nature so extraordinary that the history of climatic variations and other conditions in the particular locality affords no reasonable warning of them.’” Sampson v. Gen. Elec. Supply Corp., 78 Ga. App. 2, 8 (1948) (citation omitted). Thus, an “act of God” necessarily must be caused by an extraordinary act of nature.
Human intervention (or a negligent or intentional lack thereof) also cannot have been part of the cause for the disruption. For example, in 1955, the Georgia Court of Appeals explained that “a catastrophe arising from the force of the elements which human intelligence cannot predict nor the ingenuity of man foretell is an act of God.” Western & Atlantic Railroad v. Hassler, 92 Ga. App. 278, 280–81 (1955) (holding it was error not to provide jury instruction for “act of God” when rainfall was claimed to have been unprecedented). Similarly, “an act of God means a casualty which is not only not due to human agency, but is one which is in no wise contributed to by human agency, and that an act which may be prevented by the exercise of ordinary care is not an act of God.” Central Georgia Elec. Membership Corp. v. Heath, 60 Ga. App. 649, 649 (1939) (holding that lightning strike was an act of God, but the failure to properly ground the house was intervening human negligence and so the accident was not an “act of God”); see also Sampson v. General Elec. Supply Corp., 78 Ga. App. 2, 8 (1948) (“[A]n ‘act of God,’ in order to constitute a defense, must exclude the idea of human agency.”); Southern Ry. Co. v. Standard Growers’ Exch., 34 Ga. App. 534, 534 (1925) (“[A]n act of God . . . refers to a natural cause, and not only excludes the idea of human agency, but the act must be of such a character that its effect could not be prevented by the exercise of due diligence on the part of the carrier.”). These decisions thus informed the conclusion by the Northern District of Georgia in 2011 that the 2008 financial crisis—even though outside of the contracting parties’ control—was not an act of God. See Elavon, Inc. v. Wachovia Bank, Nat. Ass’n, 841 F. Supp. 2d at 1306.
Coronaviruses are a large group of viruses that are common among animals and humans. This novel coronavirus that causes COVID-19 is a newly discovered coronavirus that has not been previously detected in animals or humans. The source of this virus is not yet known.
And there is no doubt that the pandemic is outside the control of any individual business. But these are the sole probable agreements between litigants. Companies seeking to enforce contractual obligations are likely to point to myriad arguable intervening human failures that brought this pandemic to the United States. For example, H1N1 affected some American businesses and so this kind of viral transmission was arguably predictable. Indeed, Hollywood has told such tales, like Contagion, a 2011 film which was inspired by the SARS epidemic and 2009 flu pandemic, and Michael Osterholm, an infectious-disease expert, released a 2017 book Deadliest Enemy in which he stressed the need to prepare for an inevitable flu pandemic. On the other hand, the party seeking relief is likely to point to, among other things, the sheer helplessness of American businesses in the face of the pandemic and the Presidential Declaration of National Emergency on March 13, 2020.
The words of the contract at issue will principally guide any court being asked to apply, or deny the application of, an “act of God” provision. But what courts and juries will do in any specific instance is not predictable based on the jurisprudence and facts presently known about COVID-19.
The “act of God” defense in O.C.G.A. § 13-4-21
A contract need not include a force majeure provision in order for a party to invoke “act of God” as a defense to non-performance of a contract. Section 13-4-21 of the Georgia Code provides:
If performance of the terms of a contract becomes impossible as a result of an act of God, such impossibility shall excuse nonperformance, except where, by proper prudence, such impossibility might have been avoided by the promisor.
Elsewhere, the Georgia Code defines “Act of God” to mean “an accident produced by physical causes which are irresistible or inevitable, such as lightning, storms, perils of the sea, earthquakes, inundations, sudden death, or illness. This expression excludes all idea of human agency.” O.C.G.A. § 1-3-3; see also Royal Indem. Co. v. McClatchey, 101 Ga. App. 507, 510 (1960) (“Although Code § 102-103 defines accident and ‘act of God’ for their statutory meaning, these definitions are persuasive as to the general meaning in Georgia law.”). There is no case interpreting the reference to “illness” in this definition, so the fight about whether it extends to the COVID-19 illness will depend on how courts interpret “irresistible or inevitable” and how juries apply that interpretation as well as the instruction that the disruption “excludes all idea of human agency.”
Notably, this statutory defense requires that the act of God render performance “impossible,” while a contractual “act of God” provision may relieve performance for difficulty that is something less than impossibility. Otherwise, the applicability of this defense to a COVID-19-inspired dispute is just as subject to the human-culpability arguments as noted above.
In sum, whether COVID-19 is an unexpected, naturally occurring, and overwhelming pandemic of a novel virus or is something that was predictable and involved human agency is yet to be determined. Before relying on claims that COVID-19 is an “act of God” to excuse performance, counsel should be sought as to the arguable application of COVID-19 to the circumstances of your case. There may also be other arguments used to avoid or suspend performance of a contract (e.g., frustration of purpose); those arguments are outside the scope of this article. Further, one should consider the content of future contracts and whether to consider the inclusion of a force majeure clause that includes reference to epidemics and pandemics.