The current pandemic brought on by the COVID-19 virus has impacted supply chains; the ability to move around freely; and in some cases has shut down manufacturing entirely. Government actions including declaring states of emergency, closing borders and shelter in place orders may be the types of events that often fall within the parameters of Force Majeure clauses that can be dismissed as “boilerplate language” in most commercial contracts.
Force Majeure (pronounced fors ma-zehr) is defined as an event or effect that can be neither anticipated nor controlled. The term includes both acts of nature and acts of people. These types of provisions typically allocate the risk of loss if performance by the parties becomes impossible or impracticable.
Under the current circumstances it is recommended that companies review such provisions closely for any commercial contracts to which they are a party. They may also want to conduct a review of their standard Terms and Conditions to determine whether or not they adequately protect the company during these uncertain times. The force majeure event may trigger notice requirements and can determine what actions the other party may be permitted to take under an agreement. Depending on the type of agreement, some provisions allow for a party to terminate a contract in the event that performance is delayed or hindered for a specified amount of time. Contact BridgehouseLaw if you have questions about your commercial contracts or how your Company may be impacted by Force Majeure events.
Kristin Whalen, Attorney (NC), BridgehouseLaw LLP