Friday, March 27, 2020

Coronavirus, Force Majeure, and Your Business Contract Explained

Coronavirus (more formally known as COVID-19) is now impacting every part of life. Let’s start figuring out if and how it impacts your business law contract, initially by asking and answering these fundamental questions that are being posed. 

  1.     Practically, how might the coronavirus impact my business agreement?
  2.     How could something like the coronavirus be covered in my business law contract?
  3.     Are we talking about “Acts of God?”
  4.     How do I know if the “Force Majeure” principle applies to my business agreements?
  5.     What do I do if my business’ rights or duties are significantly impacted by COVID-19?
  6.     Can your lawyers help my company deal with this now and make improvements for the future?
  Practically, how might the coronavirus impact my business agreement? You’re probably paying for a product or service, or being paid for a product or service – or both being paid and paying. Supply chains are interrupted, resources are interfered with, money is short. This pandemic is devastating across the entire spectrum of the commercial world in addition to our personal worlds. You may suddenly not be able to fulfill your normal contractual duties to supply, not be able to pay, or not be getting paid.

How could something like the coronavirus be covered in my business law contract? Probably by way of what is usually called a “Force Majeure” clause. This type of provision, found in most well-drafted business law agreements, typically excuses a contractual party from performing its duties, in part or in whole, for a temporary time without being in breach of the contract, if the non-performance is due to the Force Majeure cause / event.

Are we talking about “Acts of God?” Yes, no, and/or maybe. (Great lawyer answer, right? In all seriousness, in some ways the answer to this question somewhat depends on one’s religious beliefs.) “Back in the day” Force Majeure contractual clauses were often referred to as “Acts of God” clauses. Now, many contracts which have Force Majeure clauses include in the list of possible events/causes the words “acts of God”. For example, you might be excused from performing your duties to the extent that you cannot reasonably perform them due to “hurricanes, labor strikes, power outages, acts of God…,” etc. But Force Majeure clauses, as you can see, typically include many more events/causes than “acts of God” alone.

How do I know if the “Force Majeure” principle applies - or could apply - to my business agreements? Could the Force Majeure principle apply to your contracts? If the contract has such a clause, then yes. The answer can somewhat be ‘yes’ even if you don’t have such a clause, but that’s a sub-topic for a different article. Does this principle apply to your business contract? If it has a Force Majeure clause and if there are Force Majeure type causes/events interfering with the performance of the contract, then yes it likely applies. (Please understand we aren’t saying that the clause applies in your exact situation, which is not known to us, and please understand we aren’t giving legal analysis about any specific situation – each specific situation depends on an analysis of the specific facts involved.)


What do I do if my business’ rights or duties are significantly impacted by COVID-19? For one thing, find out if there is a Force Majeure contract clause which may apply. If there is, ask a lawyer to analyze your situation. Even if there isn’t, ask a lawyer to analyze your situation. Practically, it also makes sense to consider communicating with your contractual partners to alert them to the challenging circumstances, whether those circumstances may cause you to be unable to perform or you fear that they may cause another party to fail to perform, or both, and see what cooperative measures can be agreed upon, or at least level-set expectations and confirm present-day realities.

Can your lawyers help my company deal with this now and make improvements for the future? That’s what we do. We explore, we troubleshoot, we diagnose, we advise, we repair, we resolve, we combat – whatever the situation calls for. If you want help and the subject matter and the jurisdiction (which state, etc.) match up with those of our Firm, reach out to us and ask for a consultation; one way to do so is by clicking here. Good luck and keep yourself – and your business – safe!

McGrath and Spielberger, PLLC handles business law and contract law matters every day, and has lawyers who are licensed to practice in FL, GA, NC, OH, SC, and TN (if you are unsure as to what jurisdiction applies to your legal matter, we can help make that determination).