Varnum (Michigan): COVID-19: Managing Contractual Uncertainty

COVID-19 impacts everyone and has brought into focus parties’ contractual rights and obligations. This is not a novel issue. In the 1870s, smallpox swept through Alpena, Michigan[1] resulting in extended school closings[2] and the school district refusing to pay teachers their contracted salary. Predictably, litigation ensued. The school district argued its obligation to perform (paying teachers) was excused because the smallpox epidemic was an act of God.[3] The school district prevailed at trial but lost in the Michigan Supreme Court.[4] The court reasoned that although the school district’s decision to close was wise, it was merely a “strong expediency” not an “absolute necessity,”[5] and that, in the absence of any act of God provision (also known as a force majeure provision), teachers should not suffer from the district’s decision.[6] The decision remains good law and highlights the difficulty in establishing contractual impossibility of performance in a contract that lacks an act of God provision.

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