An article written by McCathern Frisco Partner Ty Sheaks was recently published in the August edition of “Headnotes”, the official publication of the Dallas Bar Association. The article, “Can “Fear” Majeure be Used to Cancel an Event or Contract?” (page 18), takes a look at the implications of events or contracts being cancelled when there isn’t an actual force majeure event or governmental restriction, just fear of one. This recent trend, occurring in the wake of the Covid-19 pandemic, raises many questions that Ty addresses based on his deep expertise in risk management, venue management, and restaurant and hospitality law.

We have re-published the article below for our readers:

Can “Fear” Majeure be Used to Cancel an Event or Contract?

By Ty M. Sheaks

In the wake of more recent natural disasters and the pandemic (we don’t talk about C-O-V-I-D; sorry Disney Dad joke) a number of businesses, events, and organizations are re-evaluating their underlying contracts and legal options for performance, postponement, or cancellation. There are some legally recognizable and enforceable excuses available under Texas law to refuse performance, such as force majeure, impossibility, impracticability, and frustration of purpose. But what happens when there isn’t an actual occurrence or there aren’t specific government restrictions to trigger a force majeure event to postpone or terminate an event or contract? Can the more recent trend of “fear” majeure be sufficient grounds to postpone or terminate an event? As any lawyer will tell you…it depends.

Historically, force majeure events were commonly referred to as an “Act of God” or something beyond a party’s control that basically prevents or makes performance of one’s obligations “impossible, impracticable, or illegal.” Typical force majeure events or “acts of God” included occurrences such as floods, earthquakes, hurricanes, wars, strikes, or boycotts. Texas Courts generally analyze the specific terms of the contract to determine whether an event or occurrence will trigger a force majeure clause and relieve a party from its contractual obligations. Typically, if the applicable contract contains a force majeure provision, it depends on whether that provision was the “long” or “short” form (i.e., laundry list of specific events vs. broad catch-all language).

Folks who did not have force majeure language in their contracts or did not have sufficient provisions have since revised the force majeure language to include additional key terms to invoke that provision in postponing or terminating events (i.e., referencing “disease, viral outbreak, epidemic or pandemic” vs. just COVID19, and/or referencing “governmental actions,” “emergency declaration” or “any law or action taken by a government or public authority”). Similarly, parties have trended towards the “long” form to more specifically detail possible events to trigger cancellation (i.e., severe storm warning/watch, tornado, fire or wildfire, etc.).

Even if you have a force majeure clause or recently beefed it up to clarify or add to the list of potential events can it be used to invoke postponement or cancellation in the absence of a specific weather occurrence or governmental restriction? Maybe and it depends.

Specifically, it depends on whether the basis or reason for the “fear” is sufficient to invoke or fall within the force majeure language. For example, if the “fear” relates to a more generalized concern over say the chance of severe weather (which it’s Texas y’all so wait a minute and the weather will change) or the possible rise in infections related to a new variant or Monkeypox, but there is no actual occurrence or specific “governmental action” that warrants or mandates closure or cancellation of an event (or even if your event is in a location that has mandates against mandates for government shutdowns), what then? The likely answer is that it would not be sufficient or meet the threshold of impossibility or impracticability to equate to a force majeure event.

However, if the underlying agreement contained language that specifically addressed the “worried artist” or “fear” issues then there might be sufficient grounds to invoke postponement or termination. For example, the recent wave of postponed or cancelled shows on Broadway for artists such as Sir Elton John cancelling shows after receiving a positive test were premised on specific language in the underlying agreements that allowed for last minute changes in scheduling. Same would be true for outdoor events that had to monitor and take into account severe weather events. Again, this can be addressed either initially in the contract, or by negotiating additional addendums or riders to the contract after the fact.

Additionally, if attempting to invoke or respond to a “fear” majeure event one should also pay close attention to and comply with not only any formal notice requirements in the underlying agreements, but also applicable language if there are coinciding event cancellation or business interruption insurance policies.

So, what happens if you are faced with a “fear” majeure possibility of postponing or cancelling an event or contract? First thing to do is check the operative agreement and see if there is a force majeure clause. Second, determine whether the basis for this event falls within that definition (and consulting with a good lawyer if need be). Third, double-check and confirm whether the notice period was proper and the actual notice was made in compliance with the contract. Fourth, determine where possible venue of any dispute would be (litigation vs. arbitration), what law would apply, and potential categories or limits on damages and possible recovery of
attorney’s fees. Finally, it all comes down to effective communication and negotiation to determine whether it makes sense to postpone, cancel, or enforce the contract and potential litigation.