Apr 9, 2020 - Economy

Pacific Collective says coronavirus is an act of God that prevented ExxonMobil deal

Illustration of someone in a hazmat suit grabbing a briefcase

Illustration: Eniola Odetunde/Axios

Pacific Collective, a California retail developer, is asking a court to declare the state's coronavirus lockdown to be an act of God, or force majeure, that prevented it from completing a $4.2 million property purchase from ExxonMobil, per Reuters.

Why it matters: This is the leading edge of what could become a flood of similar lawsuits. Force majeure is a common term in M&A contracts, but there is no legal consensus that it covers a pandemic — let alone government action in response to a pandemic.

The bottom line: "Clauses that are silent on pandemics, epidemics, or other viral outbreaks are likely to be insufficient for a force majeure defense due to COVID-19, unless, of course, courts liberalize the force majeure analysis to account for market realities." — Paul, Weiss litigation department note

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