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Commercial Leasing Law & StrategyFeaturesLandlord Tenant LawLitigation

Settling COVID-19-Related Commercial Lease Disputes

By Frank Burke
December 01, 2020

The COVID-19 pandemic and a series of government shutdown orders have negatively impacted many contracts and commercial leases, either preventing or slowing performance and upending the expectations of contracting parties. As resulting contract and lease actions enter the court systems, the parties and the court will have to unravel complex facts, causation and allocation of risk of loss issues impacting performance often leading to losses for both parties. This article examines how these actions might be approached and resolved by settlement by applying a series of contract performance doctrines that inevitably arise during these types of situations: force majeure, impossibility, impracticability, commercial frustration of purpose, and material adverse change or effect clauses.

Strategic Considerations

Parties should approach these types of cases with realistic expectations about what will occur and the need for compromise. This is difficult time to get an early jury trial setting. Since many of the contract issues discussed herein are decided as a matter of law by the court, not a jury, the parties should consider a bench trial as a possibility. This might lead the non-performing party to initiate a declaratory relief action.

To value its case, each party should explore its best, most likely and worst trial results on liability, damages and allocation of the risk of loss. For example, the Restatement 2d Contracts Section 272 provides for restitution for part performance conferring a benefit upon another or reliance in cases of impracticability or frustration of purpose.

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