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Is The COVID-19 Pandemic A Force Majeure Event?


Anyone who opened or operated a cannabis dispensary in California in 2020 can attest to the fact that they were living in interesting times. First, operating legal, state-licensed businesses that openly sold marijuana and other cannabis products for recreational use was uncharted territory. Second, the COVID-19 pandemic brought about a once-in-a-lifetime mix of business interruption and uncertainty. Almost all the plans for 2020 that had been codified in 2019 fell through. This includes the plans for a cannabis dispensary in South Lake Tahoe that was scheduled to open just as the pandemic hit. Now the company is involved in a legal dispute with the city over whether it should still be allowed to open. Cannabis is complicated from a legal standpoint, and the pandemic only further complicates matters. If your cannabis business is involved in a legal dispute, contact a Los Angeles cannabis litigation lawyer.

South Lake Tahoe Alleges Breach of Contract After Pandemic Delays Opening of Newly Licensed Cannabis Dispensary

In November 2019, the city of South Lake Tahoe issued a cannabis license to Perfect Union SLT, and the parties entered into a development agreement in February 2020. One of the conditions of the development agreement was that Perfect Union SLT would open a cannabis dispensary within the city limits within a year of the signing date of the agreement. A month later, California was in the throes of a surge of COVID-19 cases, and the pandemic caused widespread business interruptions. One of the problems that Perfect Union SLT faced was the impossibility of getting a construction company to build a building for the dispensary, due to the high demand for construction during the pandemic and the pandemic-related delays in implementing construction projects.

Of course, the pandemic-related disruptions continued through the end of 2020, and by February 2021, Perfect Union’s dispensary still had not opened. The city warned Perfect Union that it was in breach of the agreement and that it had 30 days to at least to take steps toward curing the breach. When, at the end of 30 days, Perfect Union had made no progress toward opening the dispensary, the city revoked the company’s cannabis license.

Perfect Union has since filed a lawsuit against the city, alleging that the city unjustly revoked the company’s license. It argues that the COVID-19 pandemic was a force majeure event — a majorly disruptive event that affected all of society and was beyond the control of either of the parties to the agreement. It is worth noting that business agreements contain provisions about force majeure events that allow for a party’s inability to fulfill its contractual obligations to not constitute a breach of contract.

Speak With a Los Angeles Cannabis Litigation Lawyer

A cannabis litigation lawyer can help you argue in support of your interpretation of the laws regarding the legal cannabis industry in California, as these laws are still vague and undeveloped. Contact Obagi Law Group, P.C. in Los Angeles to discuss your situation or call 424-284-2401.


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