April 29, 2020

Force Majeure and COVID-19

From Julie Davis, HRO Resources, 1-512-355-7697 and copyright Zywave

Did you peel back the page?  Take another look at your contracts.  Many businesses have had their operations greatly disrupted in recent months due to the coronavirus (COVID-19) pandemic. If you have force majeure clauses within your contracts, it is possible that your organization may have an added layer of protection for handling the situation.

Many businesses have had their operations greatly disrupted in recent months due to the coronavirus (COVID-19) pandemic. However, if you have force majeure clauses within your contracts, it is possible that your organization may have an added layer of protection for handling the situation.

Translated from French, “force majeure” means “superior force.” These clauses provide for a suspension or cancellation of performance obligations should an event beyond your control occur.

DOES COVID-19 QUALIFY?

Like the contracts of which they are a part, force majeure clauses can be complicated. Whether or not the COVID-19 pandemic will trigger a clause depends on the following factors:

• Language—Check if your clause includes language pertaining to pandemics or diseases.

• Jurisdiction—Different states may vary in how they interpret and enforce force majeure clauses.

• Facts—Analysis of the specific facts on a case-by-case basis will help to determine what effect the pandemic has had.

TIPS FOR EMPLOYERS

Whether it be for the current pandemic or planning for the future, employers should take the time to consider how force majeure can help them. To best understand these clauses, consider these tips:

  • Document the specifics of your business interruption.
  • Remove ambiguity from future contract language.There is no concrete answer to whether the COVID-19 pandemic will trigger force majeure clauses. Your business may need to conduct audits and consult with legal counsel in order to know exactly where you stand.