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The COVID-19 (“coronavirus”) public health crisis has caused unprecedented business disruptions and uncertainty for existing contractual obligations.  While many are focused on whether a force majeure clause will be triggered by the recent events, contracting parties should also consider the doctrine of “Frustration of Purpose.” Under California law, the frustration of purpose doctrine may be invoked where:

  1. Performance remains possible;
  2. but the fundamental reason of both parties for entering into the contract has been frustrated by an unanticipated supervening circumstance; and
  3. it destroys substantially the value of performance by the party standing on the contract.[1]

However, to excuse nonperformance of a contract on the ground of commercial frustration, the frustration must be so severe or substantial that it is not fairly to be regarded as within the risks that were assumed under the contract.[2]
Continue Reading Frustration of Purpose – Do I Have a Defense?

The global Coronavirus Disease 2019 (“COVID-19” or “coronavirus”)  outbreak has caused supply chain disruptions to businesses around the world.  From delayed production to halted factory operations and slim shipping and freight options, the coronavirus costs keep mounting for businesses facing huge losses.  Developing a cogent response to the outbreak can be extremely challenging, given the scale of the crisis and the rate at which it is evolving.  Sheppard Mullin has mobilized a task force to assist clients address potential legal issues that may arise with respect to their supply chain or contracts.
Continue Reading The Impact of Coronavirus on Supply Chain