COVID-19 and Possible Implications of Force Majeure Provisions in Contracts

Hannah E. Mudd

By Hannah E. Mudd



Many companies, across industries, are wondering if they will be able to meet their contractual obligations due to COVID-19 and its far-reaching ramifications. In fact, many government restrictions, quarantines, supply chain and transportation disruptions are already impacting many companies’ performance.

The question is whether this pandemic and its effects on businesses will excuse any delays or non-performance on contracts. Specifically, how will courts interpret force majeure provisions and will COVID-19 count as a force majeure event? Ultimately, the answers depend on many factors, including the specific language of the provision in the relevant contract, the appropriate governing law, and fact or deal-specific concerns.

Businesses need to understand how force majeure provisions are triggered, how they are often interpreted, and how they may be affected by a health crisis, act of God, or government action and whether performance truly becomes impossible, impractical, or unreasonably expensive.

Force Majeure Basics and Court Interpretations

Contracts commonly attempt to address the risk of unforeseen events outside of your company’s control that will either delay or completely prevent performance through a force majeure provision. These provisions try to reduce uncertainty, allocate the risk of specified events, and excuse your company’s performance during the event. Typically, force majeure provisions include specific qualifying events that will preclude performance and several catch-all events such as acts of God, war, pandemics, labor strikes, natural disasters, governmental action or interference.

Most jurisdictions read force majeure provisions and events narrowly to avoid undermining the stability and predictability of agreements. If a catch-all is included, narrow interpretations are again applied to include only events of the same general nature as those explicitly listed. If the list of force majeure events is open-ended or includes a broad catch-all provision, the court will conduct a foreseeability test of the event in question to determine if it was a contemplated exclusion.[1] Continue reading »

CARES Act Offers Forbearance Options Including Residential Foreclosure and Eviction Moratoriums

Hannah E. Mudd

By Hannah E. Mudd



Most of us are well aware of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the help it provides to small businesses, individuals, and the health care industry affected by the COVID-19 pandemic. But three changes in the CARES Act are of particular importance to residential property owners, lenders and loan servicers. These changes involve forbearance, foreclosure, and eviction from property financed with federally-insured residential loans.  (For questions regarding steps Missouri or Illinois have taken on this front or possible commercial loan implications, please see COVID-19-related Forbearance Options Including Foreclosure and Eviction Moratoriums)

1.  Single Family Federal Foreclosure Moratorium and Consumer Right to Request Forbearance

Covered Loans:

The federal foreclosure moratorium, created under Section 4022 of the CARES Act, includes a borrower’s right to request a forbearance. The CARES Act moratorium and forbearance provisions are only available for federally backed residential mortgage loans. Relevant loans are secured by a lien on residential real estate designed primarily for the occupancy of 1 – 4 families (including individual units in condominiums and cooperatives). For those unsure if their mortgage loan is federally backed, such loans are typically:

  1. Insured by the FHA under Title II of the National Housing Act;
  2. Insured under the National Housing Act, Section 25;
  3. Guaranteed under the Housing and Community Development Act of 1992, Section 184 or 184A ;
  4. Guaranteed or insured by the Department of Veterans Affairs;
  5. Guaranteed or insured by the Department of Agriculture;
  6. Made by the Department of Agriculture; or
  7. Purchased or securitized by Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).

Foreclosure and Eviction Moratorium Basics: Continue reading »

COVID-19-related Forbearance Options Including Foreclosure and Eviction Moratoriums

Hannah E. Mudd

By Hannah E. Mudd



As we each come to grips with the immediate changes to our daily lives brought on by COVID-19, the question of what happens if/when people can no longer pay their rent or mortgage is on the minds of tenants, landlords, lenders, and borrowers alike.

As unemployment numbers continue to spike across the country, many states (including Missouri and Illinois), individual lending companies, and banks have announced forbearance, foreclosure, and eviction changes in response to COVID-19. Banks and lenders are taking it upon themselves to aid customers struggling due to COVID-19 in addition to the assistance provided by local, state, and federal governments. If you, your business, or your property fall within this category you should contact your individual lender or bank to determine if such resources are available to you.

The federal government and some state and local authorities have put temporary emergency restrictions on foreclosures and evictions in place. Some directives do not make a distinction between commercial and residential foreclosure proceedings.

National Directives:

  • HUD and FHA: The U.S. Department of Housing and Urban Development issued a foreclosure and eviction moratorium on FHA-insured single-family mortgages and home equity conversion (reverse) mortgages. The 60-day period runs from March 8 to mid-May 2020.
    • Foreclosures: All new foreclosures and the completion of any foreclosures already in process are halted.
    • Evictions: All evictions from FHA-insured single-family properties cease.
  • FHFA (Fannie Mae and Freddie Mac):
    • The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac and backs the mortgages of 28 million homeowners, ordered a suspension of all foreclosures and foreclosure-related evictions for at least 60 days beginning on March 18, 2020.
    • The FHFA announced earlier in March that Fannie Mae and Freddie Mac would provide payment forbearance to borrowers for a mortgage payment to be suspended for up to 12 months due to hardship caused by COVID-19.Additionally, Freddie Mac has implemented a program offering relief to multi-family landlords with  Freddie Mac Multi-family Fully Performing Loans.
      • Landlords can defer loan payments for 90 days by showing hardship due to COVID-19.
      • Landlords are not allowed to evict any tenant based on nonpayment of rent during the forbearance period.
    • HUD and Public Housing: HUD may take steps soon to protect low income individuals in public housing.
    • Federal District Courts: Many federal district courts (and some state courts) have suspended nonessential hearings which would presumably bar foreclosure hearings. This decision has been made by each individual district.

Missouri Foreclosures and Evictions Directives:

Continue reading »

The CARES Act: Loans and Credits for Small Businesses, Sole Proprietors, and Nonprofits– Part Two

Hannah E. Mudd

By Hannah E. Mudd



The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) helps small business and individuals affected by the COVID-19 pandemic and provides much needed support to the health care field. In Part Two of our two-part series, we continue with a summary of each small business loan and credit program now available. Please keep in mind there are specific certifications required to ensure only affected businesses receive this assistance.

Employee Retention Credit – Section 2301

The CARES Act includes a one-year credit against the employer’s share of Social Security payroll taxes for any business that is forced to suspend or close its operations due to COVID-19. However, the business must continue to pay its employees during the shut-down.

A business is eligible for the credit in one of two ways:

  1. The operation of the business was fully or partially suspended during any calendar quarter during 2020 due to orders from an appropriate government authority resulting from COVID-19, or
  2. The business remained open, but during any quarter in 2020, gross receipts for that quarter were less than 50% what they were for the same quarter in 2019.

The business will then be entitled to a credit for each quarter, until the business has a quarter where it is recovered sufficiently that its receipts exceed 80% of what they were for the same quarter in the previous year. For each eligible quarter, the business will receive a credit against its 6.2% share of Social Security payroll taxes equal to 50% of the “qualified wages” paid to each employee for that quarter, ending December 31, 2020.

“Qualified wages” depend on the size of the business:

Continue reading »

The CARES Act: Loans and Credits for Small Businesses, Sole Proprietors, and Nonprofits – Part One

Hannah E. Mudd

By Hannah E. Mudd



UPDATED 4/23/20*

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), commonly referred to as the stimulus bill, was enacted on Friday, March 27, 2020 to help small businesses and individuals affected by the COVID-19 pandemic. The CARES Act also provides much needed support to the health care field. This two-part series provides a summary of each small business loan and credit program now available. Please keep in mind that specific certifications are required to ensure only affected businesses receive this assistance.

It may take a few weeks for the relevant funding to be received by small businesses. In an effort to help fill this gap, regulators are encouraging banks and credit unions to make small loans to individuals and businesses immediately and independently of the CARES Act.

Small Business Payroll Protection Loans – Section 1102

The CARES Act provides that businesses with fewer than 500 employees – including sole proprietors, independent contractors, eligible self-employed individuals, and nonprofits – will have access to approximately $350 billion in loans under Section 7 of the Small Business Act during the “covered period.” The “covered period” runs from February 15, 2020 through June 30, 2020 and the business must have been in operation as of February 15, 2020.

Theses paycheck protection loans are fully guaranteed by the federal government through December 31, 2020. Loans greater than $150,000 return to an 85% guarantee after December 31. The loans will have a maximum maturity of 10 years with an interest rate not to exceed 4%. At this time, the Treasury Department has indicated they will set the maturity at 2 years and that the interest rate shall be fixed at 1%. Proceeds may be used to cover payroll, mortgage payments, rent, utilities, and any other debt service requirements. The standard fees imposed under Section 7 of the Small Business Act are waived, and no personal guarantee is required by the business owner. The CARES Act also provides for possible deferment of repayment of the loans for a period of at least six months. However interest will accrue during this deferment.

Continue reading »

Privacy and Cybersecurity Practices for Working Remotely During COVID-19

Hannah E. Mudd

By Hannah E. Mudd



Just as we are adapting our daily lives, cyber-criminals have adapted their nefarious activities to capitalize on people’s fears and potential system weaknesses during COVID-19. Hackers are targeting connection vulnerabilities and sending phishing emails with COVID-19-related subject lines or pretending to be a boss/coworker using a personal account. They have also been sending malware with fake COVID-19 tracker maps, WHO, or CDC information and making social media posts or comments with pleas related to COVID-19.

Reasons systems and data could be particularly vulnerable during COVID-19 include:

  • Human error;
  • Unvetted personal devices;
  • Devices behind in patches or updates;
  • Public Wi-Fi networks; and
  • Lack of remote work ‘protocol’ or training.

As a result, now more than ever you need to review your company’s data and privacy policies and ensure your workforce can successfully work from home. To illustrate just how important this is, consider Privacy Rights Clearinghouse’s statistic that 11,613,547,443 records have been breached since 2005.

Continue reading »