Covid 19 has unfortunately caused cancellation of the IBOUSA Spring conference in Louisville. Nevertheless, Chris Cowlbeck and his staff at IBOUSA have planned a remote alternative through a Zoom meeting, along with a smaller group attending personally in Ardmore, on May 20. As usual, there’s a great line up of speakers and activities for the conference. And, just in time for the Virus, I’ll be presenting a power point on force majeure provisions in billboard transactions, especially as they apply to Covid 19. I’m sure Chris will have the power point on the IBOUSA website or otherwise available, but the following is a summary of my presentation (and I hope you can attend the conference remotely or personally, and hear the entire thing).
All of us are painfully aware that many businesses, including billboard companies, are compelled by the Virus to conserve their assets, cash, and services, and to explore methods to defer, discount, and cancel their contractual obligations. One of the best ways to do so is through a contractual force majeure provision, namely a clause that excuses, defers, or conditions delays or outright failures in performance on specified unforeseen occurrences beyond the control of the parties. The following is a typical force majeure clause in a commercial contract : “Any delay in or failure of performance by either party under this Agreement will not be considered a breach of this Agreement and will be excused to the extent caused by any occurrence beyond the reasonable control of such party including, but not limited to , acts of God such as fire, hurricanes, floods, or tornadoes, war, strikes, or pandemics.” Force majeure clauses could be used in a variety of agreements used by the out of home industry, including ground leases, advertising contracts, asset purchase agreements, and vendor purchase and service agreements.
Most standard billboard ad contracts and ground leases don’t contain force majeure clauses, at least by this name, but they often contain a clause that affords the tenant/billboard company certain rights and relief upon unforeseen circumstances, such as the following: “If, in Tenant’s sole reasonable discretion, for any reason not caused by Tenant, including but not limited to (1) the Sign’s use is prevented or restricted by law or governmental order; (2) the electrical service or illumination to the Sign is unavailable or interrupted; (3) there is a diversion of traffic resulting in a reduction in the views of the Sign from the adjacent thoroughfare; (4) Tenant is unable to secure all necessary permits for the erection, maintenance, and operation of the Sign, or such permits are cancelled; (5) the Premises cannot be safely or efficiently used for the operation of the Sign for any reason; or (6) the Sign’s value and advertising potential is diminished, then Tenant may in its sole discretion (a) reduce the rent in direct proportion to the loss suffered for so long as such loss continues, or (b) cancel this Lease, thereby terminating any further obligations of either party.” These types of clauses affording billboard company/tenants relief usually don’t expressly include pandemics among the enumerated circumstances; however, there’s a good argument that these “Stay at Home” governmental emergency orders qualify, as they prevent billboard company employees from working, and diminish the highway traffic and views and value of the signs.
Even without a force majeure clause, there are certain doctrines in the law that may also provide relief to parties in commerce, including billboard companies. Specifically, “impossibility of performance” is an unforeseen circumstance beyond the control of the parties that renders performance of the contractual terms impossible. A good example is in times of floods, hurricanes, or even pandemics, if the government effectively countermanded billboards, and required their use for emergency messages instead of commercial advertising, the billboard company might have a valid impossibility defense of performance of his ground rent obligation.
There are many practical considerations in the enforcement of force majeure provisions and negotiations for compromise, all of which boil down to balancing the long term benefit of maintaining a particular relationship by providing reasonable accommodations, compared to the expense, risk, attorneys fees, and inconvenience of collection efforts. As we’ve been hearing so much lately, “we’re all in this together.” Therefore, like any other contract right and obligation, follow the terms and conditions of the force majeure clause, if one exists in the contract. If not, however, try to work with both those who owe you obligations, like advertisers, and those to whom you owe obligations, like landlords, with shared empathy, understanding, and concern. Remember, this Covid 19 will eventually pass, and you’ll want to maintain a positive and productive relationship with all of your business partners when it does.
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