By Mike Anthony, Founder and Principal of Anthony Law

COVID-19 has slammed our economy. Hundreds of thousands are being laid off and revenue for many businesses dropping to zero. New York, California, and Illinois are in lock down restricting the movement of 70 million Americans. 48 US states have declared states of emergency and the stock market has lost one-third of its value. The economic impact has been and will continue to be devastating. It’s a burning house being torched to the ground.

In a personal Facebook post, I gave some practical advice. This advice comes from being a lawyer for over twenty years and being a principal of a small law firm that practices in the areas of commercial and business law, real estate, employment, technology and business litigation. Our firm goes to bat every day to protect and defend our clients. We understand contractual obligations and how they are enforced. We’ve been in Court for many types of claims including evictions in landlord tenant matters, foreclosures in mortgages, and lawsuits for failure to pay as required under a contract. We understand the process and the defenses.

Now, I’m going to get philosophical here. The law is not a mathematical equation where 1 plus 1 equal 2. Laws represent our values – they are a set of principles that govern us. We do this to have an orderly society and fairness. But there are exceptions to the rules and defenses. Importantly, courts can apply equity to any case. This is where courts look at what is fair and just when unforeseen circumstances occur.

COVID -19 was more or less unforeseen and unknown until recently. It is not a result of any act or omission on the part of any American.

Here was my practical advice on Facebook on March 19:

Survival Mentality: All, inundated with questions on legal small business issues. Here is my general advice to small business owners and it applies on the personal front too.... Pay whomever you want or don’t pay. Nobody is suing, foreclosing, evicting, etc. You will be fine. Pay utilities of course. After that it’s up to you. 

The advice about not paying bills holds true today. Banks will not be foreclosing. Most landlords, other than the silly ones, will not be evicting. I can’t imagine a judge will allow it. Vendors - hold off on them too. Credit reports and legal actions will be expunged. In sum, our laws and the contracts we entered into never contemplated these events. We will get through this – all of us. Most seem to operating on an unspoken 60-day grace period on all payments – on everything.

Relevant Defenses: Doctrines of Mitigation, Frustration of Purpose, and Impossibility of Performance

Nevertheless, there are some actual legal doctrines that can be used in defense.  One such doctrine is the doctrine of mitigation. This requires a suing party to lessen or mitigate damages. In this environment, evicting you will not be lessening the damages.

There is also the doctrine of frustration of purpose. This occurs when an unforeseen event undermines a party's principal purpose for entering into a contract. For example, bars and taverns were able to terminate their leases upon the passage of prohibition.

Another legal doctrine of defense is impossibility of performance. This doctrine excuses performance under a contract where performance is impossible due to unforeseeable events. An example is when government passes a law that makes contract performance illegal.

Finally is “force majeure.” You will likely be hearing this term quite a bit in the near future. This contractual provision is negotiated between the parties and specifically details events that would terminate a contract. Examples include earthquakes, floods, terrorism, civil disorder and riots. Interestingly, many force majeure provisions do not specifically include pandemics. You can be sure they will now.

In sum – everything will be alright. Our laws were meant to protect us. COVID-19 is new. Don’t be afraid to miss those payments. If, any bank, landlord, or otherwise, acts out of line, you have legal and equitable defenses (and public opinion). I also believe state and federal governments will be assisting soon. This was not your fault. Don’t sweat it.    

The foregoing is intended for practical use and neither constitutes legal advice nor creates an attorney-client relationship between the reader and Anthony Law.