But I thought COVID-19 triggered force majeure . . .
Mitchell Milby
Hon. AIA Dallas, Hon. TxA; Managing Partner at MILBY LLC attorneys + counselors; General Counsel for Chint Power Systems America Co.
Not so fast.
I’ve been getting a lot of questions lately about force majeure. Specifically, does it apply to my project as a result of COVID-19? The answer: maybe yes, but likely no if you are like most.
Force majeure is a concept that excuses performance in certain circumstances. Most contracts include it and rely on the same terms to define it, e.g., “acts of God, flood, strikes, war,” that sort of thing. In short, if a war prevents you from performing, you notify the other side and your performance is excused until you can perform (war is over).
If you’re like most people, you probably blew past your force majeure clause and relied on the “form language.” Indemnity and defense clauses are much more interesting, right?
What does that mean to you? It means that if your force majeure language fails to address things like “pandemics, public health emergencies, or local, state, or national government orders” then COVID-19 cannot be used to claim force majeure under your contract.
In other words, if your Massachusetts supplier can’t ship materials to Texas because the state declared that your supplier is “nonessential,” you’ll probably have to look elsewhere to excuse your delayed performance. Also, lost revenue, even if a result of COVID-19, is almost never a reason to claim force majeure. You might try the common law defense of impossibility of performance, but financial reasons are still excluded and its application varies widely by state.
So, what am I telling my clients? Read the contract you signed, then let’s talk. We’re in this together, so we’ll figure it out together . . . and for the new contracts, let’s take a look at your force majeure clause together – and revise it. That’s why pencils have erasers, right?
Senior Project Manager ? CBRE | RENG Moderator
4 年Hi Mitch- we’ve been talking about this a lot at my house... Curtis Stogsdill Jason Collington
Director of Legal & Regulatory Compliance | Contracts, Technology, Dispute Resolution & Risk Management Focus
4 年Well said Mitch - it's a complicated and (intentionally) narrow defense that may or may not apply here - the facts matter. No matter what, a conversation internally and with your supply chain partners is the right decision. Both sides (usually) want performance to the greatest extent possible...let's try to avoid scorched earth if we can. And, remember...this will pass and we want relationships to survive and thrive. Don't panic. #God Bless
BI Administrator at First American Title
4 年I never knew this nor considered it before. Thank you for the education!