David Hoffman on broken contracts during pandemics

The COVID-19 pandemic has canceled events ranging from weddings and concerts to sporting events and conferences—and the courts are already congested with lawsuits to sort out the mess. These disruptions are demonstrating the shortcomings of contract law during a disaster in which broken deals were necessary to protect public health, two professors argue in a new paper.

David Hoffman of the University of Pennsylvania Carey Law School and University of Virginia School of Law professor Cathy Hwang explore the issue in “The Social Cost of Contract,” and argue that renegotiation, rather than timely and expensive litigation, is the best course of action to maintain relationships.

“During the Great Pause of March and April 2020, it became obvious that not performing certain contracts had become necessary to stop the virus,” says Hoffman. The law, he adds, says “shockingly little” about pandemics and contracts. “One of the only ways that parties can get out of performing contracts is if there’s some major unexpected event that counts as a force majeure—an unforeseeable circumstance that prevents someone from fulfilling a contract. But there’s some debate as to whether pandemics, which are arguably quite foreseeable, count as unexpected. Other than that, our courts generally enforce contracts as written—and that predictable enforcement is thought of as a feature, not a bug, of American law.”

Read more at Penn Law News.