The COVID-19 pandemic disrupted businesses, supply chains, and contractual agreements, leading to disputes over breach of contract. Many businesses and individuals were unable to fulfill their contractual obligations due to government shutdowns, supply chain delays, and financial hardships. In California, certain legal defenses—such as force majeure, impossibility of performance, and frustration of purpose—may apply to contracts impacted by COVID-19. In this blog post, we’ll explore how California law handles COVID-19-related contract disputes and what legal options you may have.
What Constitutes a Breach of Contract?
A breach of contract occurs when one party fails to fulfill their contractual obligations without a valid legal excuse. In California, a breach can be:
- Material Breach – A significant failure that affects the contract’s core purpose.
- Minor Breach – A partial failure that does not completely undermine the contract.
- Anticipatory Breach – When a party informs the other in advance that they will not perform their obligations.
Common COVID-19-Related Breach of Contract Issues
Due to pandemic-related disruptions, many businesses and individuals faced:
- Canceled events and service agreements
- Supply chain disruptions preventing delivery of goods
- Business lease disputes due to shutdowns and lost revenue
- Employment contract issues, including layoffs and furloughs
Legal Defenses for Breach of Contract Due to COVID-19
1. Force Majeure Clause
- A force majeure clause excuses contract performance due to unforeseeable events beyond a party’s control (e.g., natural disasters, pandemics).
- If the contract includes a force majeure clause that specifically mentions pandemics, government actions, or public health emergencies, it may relieve the affected party from liability.
2. Impossibility of Performance
- Under California Civil Code § 1511, contract performance may be excused if it becomes physically or legally impossible to fulfill due to circumstances beyond control (e.g., government-mandated closures).
- Example: A venue contract for a wedding may be voided if government lockdowns prevented gatherings.
3. Frustration of Purpose
- If an unforeseen event destroys the main reason for the contract, a party may argue frustration of purpose.
- Example: A company rents office space, but government restrictions prevent any in-person business operations.
4. Negotiation and Contract Modification
- Instead of pursuing litigation, parties may renegotiate terms to accommodate pandemic-related delays.
- Courts generally prefer parties to attempt good faith resolutions before pursuing lawsuits.
Legal Remedies for Breach of Contract
If a breach occurs, the injured party may seek:
- Damages – Financial compensation for losses caused by the breach.
- Specific Performance – A court order requiring the breaching party to fulfill their obligations.
- Rescission – Canceling the contract and restoring both parties to their original positions.
COVID-19 led to unprecedented contract disputes, but legal defenses such as force majeure, impossibility, and frustration of purpose may excuse nonperformance in certain cases. If you are involved in a breach of contract dispute due to COVID-19, Law Advocate Group, LLP can help you evaluate your legal options and seek a fair resolution. Contact us today for expert contract dispute assistance.
