Overview
In a decision last week, Judge Cote ruled that the COVID-19 pandemic qualified as a "natural disaster" that fell within the scope of a contractual force majeure clause. The defendant auction house had agreed to auction a painting owned by the plaintiff and pay it a guaranteed minimum price, but invoked its right to terminate the agreement after the auction was postponed by the COVID-19 pandemic and related government restrictions.
The force majeure clause applied in the event of "circumstances beyond our or your reasonable control, including, without limitation, as a result of natural disaster, fire, flood, general strike, war, armed conflict, terrorist attack or nuclear or chemical contamination." Judge Cote held that the pandemic was "a circumstance beyond the parties' reasonable control" and a "natural disaster":
It cannot be seriously disputed that the COVID-19 pandemic is a natural disaster. One need look no further than the common meaning of the words natural disaster. Black’s Law Dictionary defines “natural” as “[b]rought about by nature as opposed to artificial means,” and “disaster” as “[a] calamity; a catastrophic emergency.” . . . By any measure, the COVID-19 pandemic fits those definitions. Moreover, a pandemic requiring the cessation of normal business activity is the type of "circumstance" beyond the parties' control that was envisioned by the Termination Provision. The example events listed in [the Provision] include not only environmental calamities events such as floods or fires, but also widespread social and economic disruptions such as “general strike[s],” “war,” “chemical contamination,” and “terrorist attack.”