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How does the COVID-19 Pandemic Affect Your Contracts?

Many things have slowed down or come to a stop as a result of the Covid-19 pandemic. However, how does this pandemic affect contracts to which you are a party? 
HOW DOES THE COVID-19 PANDEMIC AFFECT YOUR CONTRACTS?
By Attorney John A. Buric
 
 
Many things have slowed down or come to a stop as a result of the Covid-19 pandemic. However, how does this pandemic affect contracts to which you are a party?  Can either party simply cancel the contract, whether it's a written contract or a verbal contract?  Does the contract terminate automatically? Are you obligated to pay money to the other party even if you or they cannot perform? Are you entitled to a refund of a deposit? These unprecedented inquiries are now arising on an almost daily basis.  Addressing these issues is not necessarily straightforward and making the wrong decision or assumption could subject you to legal problems and financial liability.

If there are problems with you or another party being unable to perform a contractual obligation due to the Covid-19 situation, the rights and obligations of the parties should be legally  evaluated. In general, the first places to look for an answer are the contract itself, if written, and any applicable laws that might apply to the matter.

If there is a written contract, many contain what is legally referred to as a force majeure provision to address situations where there is an “unforeseeable” event that first occurs after the time a contract is executed, thereby making it untenable or impossible for one party to perform even after the exercise of reasonable diligence and care to overcome the delay or condition.  However, the specific language of that provision must be legally evaluated, as many force majeure provisions did not contemplate a pandemic situation that shut down or impaired a state and national economy, and did not address such a situation. A force majeure clause may define specific events that qualify as circumstances meriting a change in performance under the contract and/or include broad “catch-all” language which might be vaguer and apply to anything out of the parties' control. Accordingly, the specific language of each provision must be evaluated.  Unfortunately, Arizona lacks legal case law authority dealing with the interpretation of force majeure provisions. If a contract does not contain a force majeure provision or there is no written contract, then the common law doctrines of impossibility, frustration of purpose or impracticability may excuse performance of a contract if they are based on an unforeseeable event occurring after the contract was made.
We are living in uncertain times during the current Covid-19 pandemic and we are challenged to navigate our way through uncharted territory to address unprecedented contract and legal issues.  Because the areas of contract law discussed above can be legally and factually specific, I strongly urge you seek legal advice prior to terminating a contract, returning money or a deposit to another party (other than statutory rent deposits), or if another party is seeking to terminate a contract or obtain money from you. Also, if you are contemplating entering into any contracts in the future, I recommend that you have an attorney draft a suitable force majeure provision to help manage future unforeseeable events and liabilities.
 
John A. Buric is an MHCA member and attorney with the Phoenix, Arizona law firm of Warner Angle Hallam Jackson & Formanek PLC. He served as a Superior Court Judge Pro Tem for 17 years and has handled mobile/manufactured home and RV community matters for over 30 years. For additional information, Mr. Buric can be reached at (602) 264-7101 or jburic@warnerangle.com. Additional informational articles can be found at www.warnerangle.com
 
This content of this article is for informational and educational purposes, contains the current opinions of the author and should not be considered as rendering legal advice. The specific facts of a matter, legal interpretations and changes in the laws could materially affect the opinions contained in the article. Current legal advice should always be sought on any particular matter.
 
 
 
 
 
 
 
 

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