Update on Force Majeure Provisions Relationship to COVID-19

There is new case law development regarding the use of force majeure provisions during the COVID-19 pandemic.

In the case In re Hitz Rest. Grp., one of the issues that the court had to decide was whether a restaurant’s force majeure provision was triggered as a result of the executive order issued by Illinois Governor J. B. Pritzker. The court stated:”The force majeure clause in this lease was unambiguously triggered by § 1 of Governor Pritzker’s executive order.”

However, there was a limitation to the amount in rent forgiveness. Since the business in question was a restaurant, and since the Governor’s executive order did not prohibit all business activity in restaurants, such as take out, deliveries, and curbside pickups, the restaurant owner was not entitled to have all rent forgiven.

In this case, the restaurant owner conceded that 25% of the restaurant square footage could have been used for carry-out, curbside pickup, and delivery purposes, and as a result, the court stated that only 25% of the rent needed to be paid.

This case demonstrates  that force majeure clauses can be activated by a Governor’s executive order to shut down businesses. However, the amount of forgiveness is closely tied to the wording of the executive order, the nature of the business, and specific facts of the case. This case will likely be used in multiple other jurisdictions around the US, where there are issues surrounding force majeure and Governors executive orders.

If a Governor’s executive order has impacted your franchise business in the past couple of months, please contact franchise attorney Mario L. Herman to discuss your options.