Member Article

COVID-19's impact on contract performance looms large over business and industries across the globe. This presentation will address whether and how COVID-19 operates contractually as a force majeure event in the US and key foreign markets including Canada, Mexico, Asia, Europe and Australia.

Goals of the presentation:

• Explain how force majeure may present an avenue for non-performance under contract without penalty when unforeseeable circumstances arise
• Analyze specific examples of contract language that may permit discontinuation or termination of performance
• Understand the mechanics of making a force majeure declaration and pushing back against an unreasonable or imperfect declaration
• Review universal gap fillers in the common law (impracticability and frustration of purpose) and their unavailability/availability to contracting parties
• Canvass key foreign markets including the UK, European, Asian and other locale-specific force majeure variations as the law is emerging and companies get back to business
• Address force majeure causation and the burden of proof
• Discuss contract interpretation principles courts commonly apply to resolve competing language debates
• Explore the practical limits of force majeure including risk management considerations, drafting considerations, the duty to mitigate, and hindrance versus impossibility
• Demystify the evidence needed to rebuke a force majeure declaration, or to support one successfully
  
  

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Key Takeaways

• Review all contract provisions that may qualify as force majeure clauses, carefully analyze their applicability to both the COVID-19 event or the effects (pandemic vs quarantine order)
• Document all steps taken to mitigate and activate pre-existing crisis management programs
• Support your position with data from public sources, peer/trade groups, associations and governmental orders (CDC, NIH, State Health Boards, Executive Orders)
• Timing is everything and perfection matters when notice is given, the non-performing party’s FM notice could be viewed as an intention never to perform
• Substantial evidence of hinderance, delay, impossibility, or impracticability must be gathered, a triggering event standing alone is usually inadequate
• Courts will likely apply an objectively reasonably standard to disputed or ambiguous contract terms
• Courts tend to rely on traditional contract interpretation principles to evaluate Force Majeure and give meaning to all words in these clauses
• Mere threat or fear of a triggering event may be viewed with skepticism by a tribunal
• Be pragmatic and methodical about remedies including liquidated damages and whether the counterparty will have assets to pay a judgment post-litigation after weathering this crisis
• For foreign jurisdictions, determine if civil or common law system, review applicable regulations or precedent, and review specific government actions taken as a result of Covid-19 to determine if force majeure, frustration of purpose or impossibility of performance impacts a party's contractual obligations.