Commercial Contracts ' The Force Majeure Clause

• Published date: 22 March 2020
• Subject Matter: Corporate/Commercial Law, Contracts and Commercial Law
• Law Firm: Taylor Vinters
• Author: Ms Alexandra Walker and Patrick Farrant

The continued spread of coronavirus is causing global disruption to trade and commerce as the impact of lock-downs, quarantines, suspended travel and cancelled public events ripples across the business sector.

In real terms, businesses are already feeling the effects of employee shortages, work-place closures and disrupted supply chains. Against this background, there are numerous questions arising about businesses' contractual obligations and, in particular, whether coronavirus will constitute a force majeure event.

What is force majeure?

Where contractual obligations are made legally or physically impossible, force majeure clauses may be triggered. Common examples of defined force majeure events are wars, strikes, natural disasters and government actions. The force majeure clause in commercial contracts enables parties to take a break from, or be absolved of their performance obligations.

Whether disruptive events linked to coronavirus constitute a force majeure event will depend on the drafting and interpretation of the relevant contract. Unfortunately, there is no uniform rule for all and each contract must be considered on a case by case basis.

Your force majeure checklist

1. Review

Whether it is your business triggering force majeure or the other party, it is important to consider:

• Your existing contracts - to see how your contractual obligations may be affected and whether force majeure is a factor. Does the force majeure clause specifically refer to diseases or epidemics?
• The risks of non-performance - are there other means of effecting performance? Force majeure will not be triggered if it is simply more expensive or difficult to carry out your obligations.
• Mitigating the impact - consider how your business can mitigate the effect of the disruption on contractual performance.
• International contracts - will your agreements be effected by the state of affairs in other countries? Interestingly, China has been issuing an unprecedented number of force majeure certificates to help protect companies from legal disputes arising from the spread of coronavirus.

2. Notification and communication

• Review your contractual notice...