The Coronavirus, which has tragically spread quickly throughout the globe, is creating a new normal during this unusual time. Our economy is being tested with the cancellation of large events, travel restrictions, and some businesses having to temporarily shut their doors.
What is Force Majeure?
Many have asked us about Force Majeure, the provision that defines occurrences that are outside and beyond the control of the parties (acts of God, war, famine, and plague), and allows relief for non-performance in the event that such an occurrence is triggered. Without a clause that includes pandemic or quarantine restrictions, there is a chance that a contract may be at risk. This can affect many companies, who provide services and/or products.
For service contracts, the effects can happen on both sides. On one hand, for a service provider, you want to know if you are unable to fulfill the obligations by an expected deadline will it constitute a breach. On the other hand, as a buyer of service, if that service can no longer be provided at that time, does it terminate that contractual obligation by the breach.
For vendors and buyers of products, the problem can look different. In this climate you want to know if the duties of the contract are not fulfilled, how this could affect the business going forward. As a supplier of goods, this could be the inability to supply goods on time which could terminate the contract with a Force Majeure clause or offer a different option.