How can you mitigate the risks of force majeure events on contract performance?

1 Understand the scope and definition of force majeure

The first step to mitigate the risks of force majeure events is to understand how they are defined and applied in your contract. Force majeure clauses vary depending on the jurisdiction, industry, and type of contract. They may include specific events, such as natural disasters, war, or pandemic, or general terms, such as acts of God, impossibility, or hardship. You should review the force majeure clause carefully and clarify any ambiguities or gaps with your counterpart. You should also check if the clause covers both direct and indirect effects of the event, such as delays, disruptions, or increased costs.

2 Communicate and collaborate with your counterpart

The second step to mitigate the risks of force majeure events is to communicate and collaborate with your counterpart as soon as possible. Force majeure events are often unpredictable and beyond the control of either party, so it is important to maintain a good relationship and trust with your counterpart. You should notify them promptly of any potential or actual force majeure event, and provide evidence and documentation to support your claim. You should also discuss and agree on the best course of action to minimize the impact on the contract performance, such as extending the deadlines, modifying the scope, or suspending the obligations.

3 Explore alternative solutions and contingency plans

The third step to mitigate the risks of force majeure events is to explore alternative solutions and contingency plans to ensure the continuity and quality of the contract performance. Force majeure events may require you to adapt and adjust to the changing circumstances and expectations. You should consider different scenarios and options to overcome the challenges and risks posed by the event, such as finding new suppliers, subcontractors, or delivery methods, or using digital tools, platforms, or processes. Make sure you have a backup plan in case the force majeure event persists or worsens, and affects your ability to perform the contract.

4 Document and monitor the changes and outcomes

The fourth step to mitigate the risks of force majeure events is to document and monitor the changes and outcomes of the contract performance. Force majeure events may result in deviations, variations, or amendments to the original contract terms and conditions. You should keep a record of all the communications, agreements, and actions taken by both parties in response to the event, and update the contract accordingly. You should also monitor the progress and performance of the contract, and evaluate the impact and effectiveness of the alternative solutions and contingency plans. You should report any issues, problems, or disputes that arise from the force majeure event, and seek legal advice if necessary.

5 Learn and improve from the experience

The fifth step to mitigate the risks of force majeure events is to learn and improve from the experience. Force majeure events are often rare and exceptional, but they can also provide valuable lessons and insights for future contract management. You should conduct a post-mortem analysis and review of the contract performance, and identify the strengths, weaknesses, opportunities, and threats of the force majeure event. You should also solicit feedback and suggestions from your counterpart, stakeholders, and team members, and incorporate them into your contract management processes and practices. You should also update and revise your contract templates, policies, and procedures to reflect the best practices and lessons learned from the force majeure event.