Blog #contracts


09Apr

How Does Covid19 And Force Majeure Effect Your Business. A "force majeure" clause (French for "superior force") is a contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.

Defined:

A "force majeure" clause (French for "superior force") is a contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible.

It is also commonly referred to as an "act of God." The contract clause is often not given the attention it really needs. Now that Covid19 is affecting business, it may be gaining more traction.

Here is a sample language seen on MSA’s:

FORCE MAJEURE. Neither party will be responsible for any delay, interruption, or other failures to perform under the agreement due to acts, events, and causes beyond the control of the responsible party (a "Force Majeure Event"). Force Majeure Events include natural disasters (e.g., lightning, earthquakes, hurricanes, floods); wars, riots, terrorist activities, and civil commotions; inability to obtain parts or equipment from third party suppliers; cable cuts by third parties, a local exchange carrier's activities, and other acts of third parties; explosions and fires; embargoes, strikes, and labor disputes; and governmental decrees and any other cause beyond the reasonable control of a party.

From a telecommunications provider view, this is perfectly acceptable.  They have accountants that can nearly always classify any service disruption as a Force Majeure event. 

From a customer's view, this should be the ideal language:

FORCE MAJEURE. Neither party will be responsible for any delay, interruption, or other failures to perform under the agreement due to acts, events, and causes beyond the control of the responsible party (a "Force Majeure Event"). Force Majeure Events are natural disasters (e.g., lightning, earthquakes, hurricanes, floods).

Your provider should be accountable and have an ownership stake in their products.  

What will happen in the negotiations is a comprise between both parties that reads closer to this:

FORCE MAJEURE. Neither party will be responsible for any delay, interruption, or other failures to perform under the agreement due to acts, events, and causes beyond the control of the responsible party (a "Force Majeure Event"). Force Majeure Events a natural disaster (e.g., lightning, earthquakes, hurricanes, floods).  Possible Force Majeure events:  wars, riots, terrorist activities, and civil commotions; inability to obtain parts or equipment from third party suppliers; cable cuts by third parties, a local exchange carrier’s activities, and other acts of third parties; explosions and fires; embargoes, strikes, and labor disputes; and governmental decrees and any other cause beyond the reasonable control of a party.

Possible events must be mutually agreed upon by both parties. Now that Covid19 is effecting businesses looking at this clause is more important than ever.

The bottom line,  pay close attention to the language and make sure your company is absolutely in agreement with what is and what isn't a force majeure event. 

Protect your business by scheduling an appointment now.

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