Avi Tryson.Coral Gables Managing Partner, Goede, Adamczyk, DeBoest & Cross.

The coronavirus (COVID-19) pandemic uniquely impacts real estate transactions and may prevent or delay performance under the contract. Some causes of delay may include travel restrictions, self-imposed or governmental-required isolations, potential closures of offices and institutions required to fund real estate transactions, and action or inactions of a homeowners' or condominium associations.

The parties to a real estate transaction, whether buyer or seller, are likely to miss or otherwise delay certain deadlines in their contracts due to the pandemic. Some buyers may also argue that the market uncertainty surrounding the pandemic is cause alone to terminate the contract. If either party needs more time to perform due to the pandemic, the parties can agree to extend deadlines and work together to close the transaction. If they cannot agree, then the nonperforming party may rely on the force majeure (acts of God) clause of the contract or on the common law defense of impossibility of performance in order to terminate the contract or otherwise excuse performance.

Force majeure clauses are used in contracts to excuse performance due to some stated reason in the contract. For example, if the roads are closed due to a hurricane, a contractor could be excused from timely building a home. The pandemic, and the governmental orders implemented in response to it, are most likely considered events outside of the parties' control, but whether they qualify as an event of force majeure depends on the language in the contract combined with the facts of the particular transaction. Obviously if "epidemic" or "pandemic" are specific words included in the contract as an event of force majeure, then the current situation will most likely qualify as such; however, it remains to be seen whether more broad contractual language can or should be considered an event of force majeure. There must also be a causal connection between the supposed event of force majeure and the lack of performance by a party of its obligations under the contract. In other words, even though the pandemic is outside of our control and uniquely impacting real estate transactions, it is unclear whether parties are actually hindered or prevented from performance.

Even if the contract does not contain language which would seem to contemplate the pandemic as event of force majeure, timely performance may also be excused under the common law defense of impossibility. Unlike force majeure, which looks only to the language of the contract, the defense of impossibility is more generally understood to include any events that make the performance of a certain obligation of the contract impossible. Courts have required that the party claiming impossibility must show that the performance of the obligation must be both subjectively and objectively impossible or impracticable (i.e., not just that this particular party could not perform their obligations, but that nobody could perform such obligations in the same situation). The availability and applicability of the defense of impossibility will vary depending on the certain obligations that are claimed to be impossible to perform and the particular circumstances relating to the Pandemic in the jurisdiction in which the defense is raised.

Avi S. Tryson is the Coral Gables managing partner of Goede, Adamczyk, DeBoest & Cross. He focuses his practice on community association and real estate law.