(973) 403-9200
Many of my firm’s clients have asked whether the spread of COVID-19 and/or the unprecedented governmental actions taken to control the coronavirus will provide a defense in the disputes which are sure to arise in the context of their family law matters. The following is a general and brief overview of the possible defenses available in cases arising under New Jersey law, and where it is clear from the language of the specific contract that NJ law will be applied in interpreting that contract.
The term “force majeure” (a superior force) is classically defined by the courts as “an event or effect that can be neither anticipated nor controlled and can include both acts of nature and humans.” Many contracts include specific clauses dealing with and describing force majeure events and in New Jersey such clauses are enforceable, but they are strictly construed in light of “the contractual terms, the surrounding circumstances, and the purpose of the contract.” The basic principle is that the event or cause must have been unforeseeable beyond the reasonable control of and without the fault or negligence of the party claiming the defense. As one case held “the Court must enforce non-ambiguous contracts as written and not make a better contract for either party.”
It is important to note that a specific force majeure defense is typically only available where the contract contains a force majeure clause and, in that event, the language of the clause is determinative. The concept of force majeure is rarely seen in divorce cases. Divorce agreements usually do not have a force majeure clause. Therefore, the applicability of this concept is unlikely to arise in a divorce case except under extraordinary circumstances. The COVID-19 crisis may be viewed as such an extraordinary circumstance.
These almost synonymous concepts are similar to “force majeure” except they do not flow from a specific provision in the contract. They are based on the premise that performance under a contract may be excused by intervening events that make performance impractical or impossible to perform. They are exceptions to the accepted maxim that “contracts are to be kept and a party is liable to damages for breach even if he is without fault and even if circumstances have made the contract more burdensome or less desirable than he had anticipated.”
Under existing case law there are three requirements necessary to invoke the frustration or impossibility defense. First, the frustrated purpose must have been a principal purpose of the contracting parties, such that without it the transaction would make little sense. Second, the frustration must be substantial and “it must be so severe that it is not fairly to be regarded as within the risks that the parties assumed under the contract.” Third, the doctrine may not be invoked where the parties assumed the risk of the occurrence of the frustrating event (e.g. a fire or a labor shortage}. The prevailing case law is that the courts will not relieve against “hardship arising from bad judgement or from a change in circumstances where these should have been in the contemplation of the parties as possible contingencies when they entered into the contract.”
The “takeaway” from this discussion:
I am ready to assist my clients in developing these defenses and in getting through these difficult times. Feel free to contact me here or by phone at (973) 403-9200.
Stay home, stay well.