Is the Coronavirus a Force Majeure Event?
As the coronavirus pandemic continues to lead the business community into uncharted public health and economic territory, it has also impacted legal precedent.
Many employers are unable to comply with the terms of service or goods contracts as a direct result of the pandemic, leaving them to rely on uncommon contractual provisions.
Force majeure clauses, which are generally disregarded as nothing more than boilerplate language, have now come under judicial scrutiny.
The clause operates to relieve one or both parties of the contractual obligations if an unforeseeable event beyond either party’s control prevents or delays performance under the contract.
Because force majeure clauses as a standalone principle aren’t sufficient to excuse performance under common law, the parties must rely on the protection afforded by the clause in the language of the contract.
To determine whether the coronavirus constitutes a force majeure event under the contract, look for relevant language that may be included, such as “disease,” “epidemic,” “pandemic,” “quarantine,” or even “acts of government.”
During the negotiation process, parties may have opted to explicitly list all qualifying events, or generally define a force majeure event as an event beyond the parties’ control.
Broad language invites interpretation and may lead to different outcomes depending on the applicable law.
Other factors to consider when evaluating a force majeure clause are: whether non-performance is a direct cause of the event; if notice of non-performance was required; or whether performance is impossible or merely delayed.
Ultimately, whether a party is relieved of performance pursuant to a force majeure clause will be determined on a case-by-case basis.
Affected businesses should assess whether disruptions to their supply chains will impact other contractual obligations they have.
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