In the context of the major COVID-19 epidemic, the parties may consider relying on these common law principles to apologize as part of their agreements. It should be recognized, however, that in most jurisdictions “the doctrines of unfeasibility and commercial opportunity must be applied sparingly” and that a party must demonstrate that the change exceeds the normal range of circumstances expected when economic circumstances change to justify non-compliance. See Dorn v. Stanhope Steel, Inc., 534 A.2d 798, 586 (Pa. That`s great. Ct. 1987). However, in certain circumstances, a dramatic change in building revenues due to COVID-19 closures or government-imposed closures may be sufficient justification under these common law rules. However, as noted above, even if the argument seems clear, the parties are well advised to make an essential communication and take all available measures to mitigate the impact of their decisions on their counterparties. Experience has shown that such measures can reduce the likelihood of litigation and improve the party`s chances of success if it is to defend its decision before a judge or jury.
A time Is of the Essence Clause (TOE) is a language contained in a contract that indicates that a specific time or date is important. In fact, a time in the essence clause says that “the dates and dates indicated in this agreement are important and mandatory for the contract.” Therefore, any delay may be one of the reasons for the termination of the contract. As countries around the world begin to respond aggressively to the COVID 19 virus, governments have called for social launch, closure of some retail, food and other stores, and forced moratoriums. Capital markets have been in turmoil for weeks. For real estate and other clients who have entered into contracts to purchase and sell real estate and bonds for financing such transactions, as well as leases, construction contracts and property management contracts, the uncertainty created by COVID 19`s response has raised critical questions as to whether and how the proposed transactions should be continued. Clients are reviewing agreements to determine whether there are entry-level conditions, essential adverse event provisions (MAEs) or force majeure provisions that could justify a decision not to proceed with a transaction. These types of provisions are found in all types of real estate documents, including loan commitments, leases, property management contracts, construction contracts, development contracts and, in some cases, purchase and sale contracts. In the absence of such provisions, clients asked whether common law contractual standards – such as frustration, government intervention behaviour or impracticality – could excuse their performance in their contracts.
Worried lenders, landlords, tenants, developers, contractors, sellers and buyers evaluate similar arguments and try to evaluate ways to ensure that a long-planned transaction is completed. This caveat outlines the fundamental outlines of these contractual arguments and the practical considerations that the parties should consider when considering their options. Therefore, it is always preferable that an EE clause be clearly stated in a contract to avoid confusion.