As social distancing and self-isolating guidelines are set in place with no immediate end in sight, many casinos are facing an uncertain future. Numerous concerts, conferences and other events held in casino convention centers have been canceled because of the coronavirus outbreak. With the virus sweeping across the world, countless legal questions are arising specifically in regard to how COVID-19 is affecting commercial contracts when one of the parties is unable to perform their obligations due to the unprecedented quarantines, shutdowns and massive disruptions to transportation and supply chains caused by the outbreak. This results in attention being given to the often overlooked force majeure provision.

A force majeure clause is a common contract provision that frees a party from having to fulfill their obligations under a contract when an unanticipated extraordinary event or circumstance beyond their control occurs, which makes their performance impossible or impracticable. Although a force majeure clause excuses a party’s non-performance, it does not do so indefinitely. It only suspends non-performance of an obligation for the duration of the force majeure event that triggered the clause. However, if the performance is affected for a long period of time, the contract may allow for the right to suspend or terminate the contract or seek an extension of time.

As is typical with any contract-related issue, the answer to whether the COVID-19 outbreak triggers a force majeure event to excuse non-performance of a contract obligation depends on the specific contract language and the local applicable law. In order to determine whether a force majeure clause has been triggered, courts typically look to whether: (1) the event qualifies as force majeure under the contract; (2) the risk of non-performance was foreseeable and able to be mitigated; and (3) performance is truly impossible. Foreseeability is a primary factor in the determination of whether a non-performance will be excused. As the world has not seen a pandemic event of this nature since the SARS outbreak in 2002, and even then, not to this magnitude, it is likely that no one could have foreseen the extent to which current events have transpired.

With force majeure clauses, there can either be an exhaustive list of events or circumstances that constitutes a force majeure event or a non-exhaustive list with general catch-all provisions found in the clause. Epidemics and pandemics are not generally specifically mentioned within a contract; however, a force majeure clause can still be triggered if there is language in the contract that specifies additional factors such as acts of governmental authorities, labor and supply shortages, or any type of broad language that is beyond a party’s control. Any broad force majeure clause language should apply as it pertains to COVID-19 since as of March 11, 2020 the World Health Organization declared it to be a pandemic, unable to be caused or prevented by a private party. Even in the absence of specific language, past disease outbreaks, such as the SARS epidemic, which was more geographically limited in size and scope, have qualified as a force majeure event in some cases.

As the COVID-19 outbreak is considered to be a global pandemic, it is less of a hurdle now to classify it as a force majeure triggering event. However, as with all contract issues, it all depends on the specific contract language. Accordingly, in order to avoid any uncertainties in the future about whether or not another similar pandemic qualifies as a force majeure event, businesses should amend or redraft their contracts to include specific language on pandemics and epidemics.

If you would like to discuss this issue or obtain legal advice in regard to gaming matters please contact authors Karl Rutledge at krutledge@lrrc.com, Glenn Light at glight@lrrc.com, or Mary Tran at mtran@lrrc.com. If you need transactional contract assistance, please contact Jeffrey Steffen at jsteffen@​lrrc.com.

This material has been prepared by Lewis Roca Rothgerber Christie LLP for informational purposes only and is not legal advice. Specific issues dealing with COVID-19 are fluid and this alert is intended to provide information as it is currently available. Readers should not act upon any information without seeking professional legal advice. Any communication you may have with a Lewis Roca Rothgerber Christie LLP attorney, through this announcement or otherwise, should not be understood by you to be attorney-client communication unless and until you and the firm agree to enter into an attorney-client relationship.

Authors

Karl F. Rutledge
Karl F. Rutledge
Partner, Chair - Commercial Gaming Group
krutledge@​lrrc.com
702.949.8317
Mary Tran
Mary Tran
Associate
mtran@​lrrc.com
702.474.2666

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