Bradley attorney Whitt Steineker was quoted in Law360 on cannabis companies that are leaning on force majeure clauses due to the COVID-19 pandemic. A force majeure clause excuses one or both parties from contractual obligations when circumstances arise that make participation impossible. However, the financial problems that have surrounded the cannabis industry for the last year could make it so even the pandemic isn’t enough for these businesses to use the contract clause.
“Many in the cannabis industry were not thriving before the COVID-19 pandemic,” Steineker said. “It may be possible that an act of God is happening, but that’s not the reason you couldn't perform.”
But it’s also not clear how judges will react — in particular, whether they’ll decide that the pandemic was in some way foreseeable, Steineker noted.
Most of the time, claims brought under a force majeure clause are frivolous, he said, so courts are pretty skeptical when they get brought up.
“I don't know that we’re going to see the answer of how the law plays out for a while now,” he said.
Breach of contract suits involving cannabis business partnerships gone bad are becoming an everyday occurrence. It’s part of the maturation of the industry, which has many businesses fighting each other for a chance at survival, Steineker said.
“Not everybody in the industry is doing all that well, and when people aren’t doing well they tend to fight,” he added.
“These things end up being extremely fact-intensive,” Steineker explained. “What exactly happened that made it impossible for you to perform? Was there this act of God, was that the cause? Or was it one of the 30 other business considerations?”
The original article, “Struggling Cannabis Cos. Look To Force Majeure Amid Virus,” first appeared in Law360 on April 28, 2020.