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Coronavirus and Force Majeure

Force majeure clauses are contractual provisions that suspend obligations due to events beyond an organization's control.

 

The term “force majeure” is French for “superior force.” Force majeure clauses are common business-related contractual provisions that provide for a suspension or cancellation of a company’s performance of obligations under the contract should an extraordinary event occur that is beyond the control of either party.

 

The issues caused by the pandemic have raised an important question for many businesses: Does the COVID-19 global pandemic qualify as a "force majeure" event for purposes of their business contracts? The short answer to this question is: it depends. 

 

Whether the global pandemic is considered a force majeure event will depend on three factors.

 

  • The language of the individual contract. Check to see if your contract’s force majeure clause includes language specific to “pandemics”, “epidemics”, “illness” or “disease”.

 

  • Jurisdiction. States vary in their interpretation and enforcement of force majeure clauses.

 

  • Facts of the case. How has COVID-19 affected the parties’ businesses and their ability to fulfill their obligations at the time the triggering event occurred? This is a fact-based analysis that will vary in almost every instance.

 

When Analyzing Force Majeure Clauses Employers Should Consider the Following:

  • Document the specifics of your business interruption.

 

  • Consider modifying future contract language to include specific circumstances such as pandemics.

 

  • Review your current insurance program.

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