The Importance of Force Majeure Clauses During the COVID-19 Pandemic

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As the coronavirus continues to have a significant impact on both our country’s people and the economy, the legal implications of a global pandemic are coming to light. Specifically, our team at Busch, Slipakoff, Mills & Slomka is seeing first-hand the importance of having a carefully-structured force majeure clause.

By definition, force majeure means “supervening cause or force.” While it may seem obscure, it is commonly found in business contracts as an agreement that if the company’s promised performance is prevented or made impossible by an event beyond its control, the performance can be delayed or excused without any contractual liability. Whether or not a business can rely on this clause to protect it from liability of not performing highly depends on its wording and how it will be interpreted under state law.

Unfortunately, many businesses often gave force majeure clauses little thought before the pandemic emerged. These clauses were generally not highly negotiated and often located at the end of contracts in a section that was copied from previous forms. As a result, the wording for specific transactions was often not updated to reflect new risks.

While businesses may have overlooked these contract provisions in the past, COVID-19 has now brought it to the forefront of scrutiny and discussion. Businesses are rushing to their legal counsel to see if phrases such as “governmental shutdown,” “pandemic,” or “outbreak of infectious disease” are covered by their clauses. We expect that post-pandemic litigation will help clear up the uncertainty surrounding many force majeure clauses, and, according to a Bloomberg Law article on the topic, a number of cases have already been filed.

If you are left wondering if COVID-19 is covered in your business’s force majeure clause, Busch, Slipakoff, Mills & Slomka can assist you. Our experienced legal team is prepared to answer your questions and can ensure that more expansive force majeure clauses are included in your contracts.