COVID-19: Defenses if a Party is Unable to Meet Their Contractual Obligations in Georgia

If the coronavirus pandemic has impacted your business’ ability to meet its contractual obligations, you may be considering your options to excuse performance.  Fortunately, there are contractual defenses available, but it may be difficult to use any of them unless your particular situation meets very specific requirements.

Invoking a force majeure clause may be the most readily available defense to excuse non-performance of contractual obligations. However, some contracts do not have a force majeure provision, while those whose contracts include the provision may not be able to invoke it because their situation does not meet the specific requirements for asserting force majeure.

Fortunately, other contractual defenses may apply in your case to avoid breach of contract disputes during or after the COVID-19 pandemic.

Impossibility of Performance

This particular contract defense applies in limited situations. For instance, you cannot excuse non-performance of your contractual obligations over your financial inability to perform. The economic fallout from the coronavirus crisis alone may not be enough to establish the impossibility of performance.

However, if your business was shut down by the government-mandated order and you had no financial ability to perform, you may be able to use this contractual defense to excuse non-performance. In that case, you need a breach of contract attorney to help you establish that your non-performance can be excused based on impossibility.

Impracticability or Frustration of Purpose

Under Georgia law, contractual parties may also excuse their inability to perform by using the impracticality or frustration of purpose defenses. As their names suggest, you can use either defense if the performance of contractual obligations is impracticable or it frustrates the purposes of the parties.

Under O.C.G.A. § 11-2-615, a party cannot be held liable for breach of contract by failing to perform if the agreed-upon performance has been made impracticable by the occurrence of an event that could not have been predicted at the time of signing the contract.

The frustration of purpose defense applies when an unanticipated event – such as a pandemic – undermined a party’s principal purpose for entering into a contract. However, keep in mind that the economic consequences alone may not establish impracticality or frustration.

Legal or Regulatory Changes

Parties may also excuse their non-performance of contractual obligations if a law, regulation, order, or restriction went into effect and made performance impracticable or impossible. Thus, if a federal, state or foreign governmental regulation, law, or order made a party’s performance impracticable or impossible, their obligation to perform may be discharged.

The stay-at-home order and other executive orders that have directly or indirectly impacted your ability to perform may serve as an excuse for non-performance. Consult with an Atlanta breach of contract attorney to determine the most optimal defense strategy in your case. Contact Carroll Law Firm to review your situation. Call at 404-816-4555 today.