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The COVID-19 pandemic has led to numerous legal disputes, particularly involving commercial leases and rent payments. A recent California First District Court of Appeal decision provides valuable insights for business owners when it comes to force majeure provisions in leases.
The Napa Brewpub Case
In this case, Stone Brewing, a Napa brewpub, attempted to invoke the force majeure provision in its lease to avoid paying rent during the COVID-19 lockdown period. The court held that the force majeure provision did not apply, as Stone Brewing admitted having the financial resources to pay rent but chose not to do so.
Understanding Force Majeure Provisions
Force majeure provisions in contracts can potentially relieve a party of their obligations if unforeseen events beyond their control make performance impossible or impracticable. However, the court in this case concluded that the force majeure provision did not apply if pandemic restrictions merely made it more difficult for Stone Brewing to pay rent – it only applied if the restrictions “delayed, interrupted, or prevented” the company from doing so.
Lessons for Business Owners
This case serves as a reminder that force majeure provisions have limitations and cannot be relied upon in every circumstance. For business owners, it’s essential to understand the specific terms of your lease, as well as the legal principles governing force majeure.
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