Idaho Business Law Coronavirus: Are Your Contracts Enforceable

By Lane V. Erickson, Idaho Business Attorney

The coronavirus has disrupted everyone’s lives the world over. Everyone has been affected by the virus in one way or another. Even if you don’t get sick, it’s more than likely that some specific and important part of your life has been altered drastically as a result of the Coronavirus. This has never been more true than when it comes to business owners, and especially those who are involved in contracts of one sort or another.

In Idaho a contract is “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes a duty.” Atwood v. Western Const., Inc., 129 Idaho 234, 238, 923 P.2d 479, 483, (Ct.App. 1996). A promise is “a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.” Atwood, 129 Idaho at 238, 923 P.2d at 483. Generally, Idaho courts will not permit a party to avoid its contractual obligations. Smith v. Idaho State University Federal Credit Union, 114 Idaho 680, 284, 760 P.2d 19, 23, (1988). Idaho Courts have long held that “an agreement voluntarily made between competent persons is not lightly to be set aside . . . because it has turned out unfortunately for one party.” Stearns v. Williams, 72 Idaho 276, 283, 240 P.2d 833, 837 (1952).

So, what do you do or what can you do if a contract you are involved in has been affected by the Coronavirus. This is a great question and is the focus of this article. Keep in mind that this article provides just a short summary of the rights or responsibilities you may have. We strongly suggest that you contact us for a free 30-minute consultation so we can give you specific guidance about your particular circumstances and the contracts you are involved in.

The first step is to determine whether your contract is in writing or not. In Idaho, an enforceable contract can be oral. However, these types of contracts are usually difficult to enforce because when things go bad, the parties involved in the contract usually remember the terms and conditions of the contract differently. Usually, to make an oral contract enforceable, there is extrinsic evidence that must be presented to show what the terms and conditions of the contract actually are. This would include testimony by people who are not directly involved with the contract. It could also be ascertained by the conduct of the parties over a length of time. There could also be some things in writing like e-mails or text messages or something similar that could held a court determine what the terms of the contract are.

On the other hand, a written contract is usually much easier to understand and enforce. This is because a written contract usually has most if not all of the terms and conditions of the contract written down. Additionally, the parties to a written contract have usually dated and signed the documents. All of this is evidence of their agreement to the specific terms and conditions that are written in the contract.

Once you know what the terms and conditions of the contract are, then you can look to those terms and conditions specifically to see if there are any escape clauses that have been written in. These are sections in a written contract that give one or both parties the right to terminate or end the performance they are required to do. These types of clauses are usually very difficult to invoke, because contracts are normally required to be performed by both parties.

These types of clauses usually include impossibility of performance, an act of God, an act of nature, or some other specific condition that makes performing the contract either extremely difficult or impossible. In legal terms, this is often called a force majeure clause. Essentially, an escape clause allows a party to break the contract without being penalized for doing it when certain situations arise.

I doubt anyone will argue that the Coronavirus could be deemed an act of God or an act of nature. It is something that is outside of the control of any particular individual including contracting parties. This is especially true because of the effect the coronavirus has had on the entire world.

The question then is will the Coronavirus give you an escape clause or allow you to invalidate your performance under the terms and conditions of a written contract. The short answer is, maybe. If in the performance of a written contract you were paid money by the other party who is now expecting you to perform some act or provide some item to them, you may be excused from having to do this. However, you will likely be required to pay the money back that you received. This is called “restitution” under basic contract law.For example, if you purchased a ticket to watch an NBA game that was cancelled by the Coronavirus, you should be able to get your money back. Alternatively, the NBA would be required to give you tickets to an alternate game when the season resumes.

On the other hand, if no exchange has actually been made between the parties, you may not be required to do anything more. Again, this depends on the specific terms and conditions of the contract, and on the relationship that is created by the contract. For example, if you have a contract for car insurance, even if you aren’t driving your car around because you are isolated during the Coronavirus pandemic, you may still be required to pay your insurance premiums under the contract in order to keep your car insurance in place.

If you have questions or concerns about whether any contracts you are involved in are enforceable during the coronavirus pandemic, we can help. We have assisted numerous business clients and individuals in creating, enforcing, or working through contractual Arrangements. We are confident that we can help you too.

Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.