For most businesses, this should start with a review of any applicable contracts. Force majeure provisions are common contract provisions that provide relief for a party’s non-performance for “acts of God” or other extraordinary events that render it impractical or impossible for a party to meet its contractual obligations. In the event the force majeure provision is triggered by such an event, it can operate as a release or limitation of liability.
In general, force majeure provisions are enforceable in accordance with their terms, but whether or not an event triggers the force majeure provision depends upon the specific terms of the provision and is a fact-specific inquiry. Below is an example of a force majeure provision:
Either party shall be excused from delays in performing or from its failure to perform, in whole or in part, hereunder during the time period and to the extent that such delays or failures result from unforeseeable causes beyond the reasonable control of such party (“Force majeure”). Conditions of Force majeure include, but are not necessarily limited to: flood, earthquake, explosion, acts of God, act of a public enemy, national emergencies, strikes, labor disturbance, transportation embargoes or delays, shortages of raw materials, inability to obtain freight or raw materials at a reasonable commercial price, shortages of necessary machinery, or government regulations.
Force majeure provisions may look to specific triggering events listed in the applicable provision or, similar to the above, maybe drafted broadly to include non-enumerated events, and often require such an event to be unforeseeable, beyond the control of the party and ultimately render it impracticable or impossible for the party to perform.
Whether COVID-19 and its effects constitute a triggering event is fact-specific and can depend on the terms of the contract and the governing law. As it relates to COVID-19, businesses that are seeking relief as a result of a force majeure provisions should look for references to “national emergencies,” “pandemics,” “epidemics,” “disease,” or the COVID-19 related effect which is causing the failure to perform or delay (such as supply chain shortages or labor disturbances). In the event such terms are not included in the provision, it may still be possible for a business to rely on the catchall provisions and “act of God” references.
After determining whether it is likely that COVID-19 triggers the force majeure provision, it is important to review the applicable notice provisions to determine whether a notice is required, when it is required, and what information it must contain.
In the absence of a force majeure provision in the applicable contract, a party may need to rely upon common law defense of “impossibility of performance.”
Please contact Dvorak Law Group, LLC to discuss specific questions and recommendations regarding your business and any force majeure provisions in your applicable contracts.
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