Contract Matters: Looking Beyond Force Majeure

April 3, 2020Alerts

The events of the last several weeks have sent many of us, both lawyers and non-lawyers, scrambling to examine contracts for a force majeure clause. Yet the analysis should not end there.

While experience matters, there is no substitute for taking the time to give your contract or contracts a detailed read, along with any amendments or other matters that may impact its terms and conditions. If it has a force majeure clause, you can determine, in consultation with your attorney, what events are covered and what events may not be covered.

Keep in mind that, depending on the jurisdiction, such clauses are frequently interpreted narrowly. Since no court has yet ruled on the current pandemic, at this point, it's important to apply common sense. 

Even if you do not find a clause or clauses that are labeled force majeure, the analysis should continue. Specifically, you want to determine how, if at all, the contract addresses delays, disruptions, interruptions in supplies or deliveries and similar events. Practically speaking, in many cases, such clauses will not be interpreted as narrowly as a force majeure clause. 

If at all possible, identify the current and future financial impact of the epidemic on your business. Remember, you have an obligation to mitigate your damages.  Moreover, once you have completed your analysis, with the duration of the shutdown unknown depending upon your jurisdiction, it makes sense to set a calendar reminder to reexamine the issue at least on a weekly basis. Circumstances evolve, and frequent consideration may give rise to innovative ideas.

What may appear possible one day may not be later on. Likewise, what is practical one day becomes more practical in the future.

No matter what the analysis, keep internal and external lines of communication open. Plan ahead cooperatively so that when the shutdown is lifted, you are ready to implement the most positive measures available.

If we can be of any help, please contact us.