Often overlooked and dismissed as ‘boilerplate’ parts of commercial contracts, the Force Majeure clauses are about to take centre stage in many contractual reviews, discussions and disputes during and in the aftermath of the Coronavirus outbreak.
Traditionally, the Force Majeure clause was thought of as ‘an act of god’ provision, protecting the parties from risk of breach in the eventuality of some significant event, outside of the control of the parties. Interestingly, though, the words ‘Force Majeure’ have no meaning in English Law and, as such, there needs to be specific reference to the events or circumstances to be protected against.
The clauses typically allow for suspension or termination of a party’s rights in the eventuality of one of the specified events, like, in the current situation, a pandemic.
Well-drafted Force Majeure clauses tend to include specific reference to ‘epidemics or pandemics’, meaning that the current coronavirus outbreak will be classified as a Force Majeure event, thus capable of allowing a delay or cancellation of performance under the contract. This could range from cancellation of large scale sporting events, delay of delivery due to manufacturing or transportation issues or cancellation of contracts for supply of goods or services.
However, there may well be specified steps to take under the contract in order to invoke the Force majeure protection, so it is vital that before any steps are taken to cease performance under a contract, the relevant terms are reviewed and the notification provisions complied with, to avoid any non-compliance that could void the protection offered.
Whilst it is to be hoped that, in the current climate, trading partners will be sensible and reasonable enough to deal with the consequences of the coronavirus outbreak without issue, it is sensible to be aware of your contractual rights, just in case you need to rely on them!
"Speak softly and carry a big stick; you will go far." Theodore Roosevelt