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May 14, 2025
As we enter into unchartered territory of uncertainty, I thought it might be helpful to share some insight that may be gained from how the courts interpreted supplier non-performance in response to the COVID pandemic.
Suppliers are searching now for alternative supplier sources in other countries to lessen the impact of imposed tariffs in countries such as China. I recently read the Delta Airlines would take delivery of new planes produced in France, via Japan, thus limited tariff liability as the plane coming into the U.S. would be considered used. During this period there will almost certainly be disruptions and delayed delivery performance. Let’s take a look at how the courts dealt with supplier non-performance during and after the pandemic. These cases have explored the applicability of doctrines such as force majeure, impossibility, and impracticability in the context of contract performance delays due to the pandemic and related government orders.
The courts have generally taken a nuanced approach, focusing on the specific facts of each case, the terms of the contract involved, and whether the pandemic and subsequent government orders made it impossible or impracticable to fulfill contractual obligations.
- Force Majeure Clauses and COVID-19: In an earlier column I discussed how now might be the time to evaluate our Force Majeure clauses to better deal with the uncertainty presented by the tariff struggle. Keeping in mind that this is obviously not the act of god that so many identify as the standard for allowing force majeure.
- W. Pueblo Partners, LLC v. Stone Brewing Co. provides a detailed examination of force majeure provisions and their application during the pandemic. The court concluded that the mere increase in expense or difficulty due to the pandemic did not excuse the tenant's obligation to pay rent, highlighting the importance of the specific impact of the pandemic on the ability to perform contractual duties. [1]
- In re Good-Cause Delays Under Speedy-Trial Rule case from the Supreme Court of Arkansas highlights a shift back to pre-pandemic standards for evaluating delays. The court announced that future delays due to COVID-19 precautions would no longer be presumed as "good cause," indicating a move towards stricter scrutiny of pandemic-related excuses. [2]
- Orsa Technologies, LLC v Department of Veterans Affairs, a decision from the Civilian Board of Contract Appeals sheds light on the fact that COVID-19 was not an automatic excusable delay. Here, the board found that the perfect storm caused by COVID was already in play, and ORSA should have foreseen the delivery challenges before agreeing to the government’s delivery requirements. Excusable delays in the contract language does not cover events that are foreseeable. [3]
- Economic Hardship and Market Fluctuations: Economic hardship resulting from the pandemic or market fluctuations has generally not been sufficient to excuse non-performance. In U.S. v. Panhandle Eastern Corp., the court stated that a force majeure clause is not intended to buffer a party against the normal risks of a contract, including market price changes. [4]
In summary, while the COVID-19 pandemic undoubtedly impacted the ability of suppliers and other parties to fulfill their contractual obligations, courts generally required a detailed examination of the contract terms, the foreseeability of the pandemic, and whether the pandemic truly made performance impossible or impracticable. These same principles may very well be applied to suppliers who challenge an agency which finds them in violation of contract terms due to non-performance. Only time will tell how the supply chain reacts to the unpredictability of tariffs.
[1] W. Pueblo Partners, LLC v. Stone Brewing Co. 2023, Cal. Ct. App., 90 Cal.App.5th 1179
[2] In re Good-Cause Delays Under Speedy-Trial Rule 2023, Ark., 2023 Ark. 55
[3] Orsa Technologies, LLC v Department of Veterans Affairs, Civilian Board of Contract Appeals, Jan 20, 2022
[4] U.S. v. Panhandle Eastern Corp. 1988, D. Del., 693 F. Supp. 88
Only time will tell how the supply chain reacts to the unpredictability of tariffs.
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Agency Discretion
Kirk Buffington
