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Understanding Force Majeure Provisions in Commercial Leases After COVID-19

Introduction: The COVID-19 pandemic has presented numerous challenges for businesses, particularly those in the hospitality industry. Many commercial tenants have faced significant financial burdens, leading to disputes with their landlords over rent payments. One such dispute, West Pueblo Partners, LLC v. Stone Brewing Co., LLC, highlights the importance of understanding force majeure provisions in commercial leases.

Background: In this case, Stone Brewing Co., LLC (Stone), a tenant operating a brewpub in a building owned by West Pueblo Partners, LLC (West Pueblo), failed to pay rent for several months during the pandemic. Stone argued that the COVID-19 regulations and business interruptions triggered the force majeure provision in its lease, excusing it from paying rent.

However, the trial court disagreed, stating that the force majeure provision only excused performance if the claiming party was unable to meet its obligations due to factors outside its control. The appellate court affirmed the judgment, ruling that the force majeure provision did not apply where the tenant had the ability to meet its contractual obligations but chose not to perform due to financial constraints.

Key Takeaways:

  1. A force majeure provision generally provides relief to a party from performing its contractual obligations when circumstances beyond their control prevent or delay performance.

  2. The mere increase in expense or difficulty in performing an obligation does not excuse performance under a force majeure provision. A party's timely performance must become impossible or unreasonably expensive due to an event beyond their control.

  3. In the West Pueblo case, the court held that Stone could not invoke the force majeure provision because it admitted to having the financial resources to pay rent during the period of the COVID-19 regulations but simply refused to do so.

Conclusion: The West Pueblo Partners, LLC v. Stone Brewing Co., LLC case serves as a valuable reminder of the importance of understanding force majeure provisions in commercial leases. Tenants and landlords should carefully review these provisions when negotiating leases and be aware of the circumstances under which performance may be excused. Ultimately, it is essential for both parties to understand their rights and obligations during uncertain times like the COVID-19 pandemic.

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