Responding to COVID-19: How to Limit Damages After a Breached Contract

If your contract does not have a force majeure clause (discussed below), you are going to have to rely on one of two defenses that are implied by law (“the Default Rules”).

Given that the occurrence and rapid spread of COVID-19 was unforeseeable at the beginning of this year, a breach may be excused if the contract was entered into before then and if performance becomes impracticable, which will depend on the facts of each case.

On the other hand, if a production company breaches a contract because it is unable to complete and deliver a film due to actors not showing up on a studio stage in L.A. over fear of the virus, the production company’s breach should be excused due to the unforeseeable event of the actors not showing up.

For example, a force majeure clause listing a number of film industry specific issues may be interpreted to not excuse a breach due to COVID-19.

A final alternative is for either or both of the parties to seek reimbursement for damages from a completion guarantor (in the case of abandoned or delayed productions) or insurance.

Veteran Hollywood lawyer Schuyler Moore explains how to limit damage in a time when "the one thing that will spread as fast as COVID-19 is litigation."

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