Using the Fires, Riots or COVID-19 to Your (Legal) Advantage

Effects on Contractual and Leasehold Requirements

Certain court-recognized defenses could be used to fend off claims arising from the failure to adhere to contractual or leasehold obligations in these “apocalyptic” times.

Oregon courts have recognized impossibility, impracticability and frustration of purpose as defenses to breach of contract/lease claims. If any such defense applies, then contract obligations no longer apply. For instance, a tenant could terminate a lease early and avoid paying rent.

Currently, state and federal orders prevent a landlord from terminating a lease due to nonpayment of rent. However, the rent continues to accrue and the tenant cannot walk away from the lease. By contrast, the legal theories discussed below could terminate the lease and any continuing rent obligations.

Impossibility
Generally, impossibility applies when one is unable to perform under an agreement because of a change in circumstances since the contract was entered.

Frustration
Frustration occurs when performance is possible but essentially worthless because of the change in circumstances.

Impracticability
With impracticability, while performance may still be possible, it has been made impractical due to the occurrence of some unexpected event. The impracticability defense is included in the Uniform Commercial Code (which applies to commercial goods) and most recent court decisions reference it as opposed to the other defenses.

These legal theories require the occurrence of some unanticipated event. Such an event can be an “act of God,” including a natural occurrence of extraordinary and unprecedented proportions.

The fires and COVID-19 arguably constitute such a natural occurrence. Also, Oregon Governor Kate Brown’s stay home and evacuation orders arguably make it impossible or impractical for one to continue to adhere to the requirements of a contract or lease.

Force Majeure Clause
Before resorting to these common law defenses, one should look at the agreement itself for any language that might provide grounds for early termination. One such escape hatch is known as a force majeure clause. It typically provides that parties are relieved of their obligations in certain circumstances such as war, riot or act of God. The fires, riots and COVID-19 could arguably trigger such a clause.

Whether current catastrophes allow one of these legal defenses has not yet been litigated and likely will not be decided upon for some time. Multnomah County Presiding Judge Stephen Bushong has indicated that he will not permit civil jury trials until a vaccine to COVID-19 is available. In the meantime, a good negotiator should be prepared to raise or respond to these defenses. For assistance, contact A+A.