From boardrooms to stockrooms, companies of all shapes and sizes around the country are grappling with COVID-19 and the “new normal.” Federal, state and local restrictions on commerce, travel and our very freedom of movement have thrown the business world into disarray, threatening the ability of many companies to satisfy their contractual obligations. As a result, the doctrine of “force majeure,” and the related defenses of impossibility, impracticability and frustration of purpose, have emerged to the forefront of many discussions in the commercial sector. But many companies have never actually addressed or handled these concepts, which are complicated and often do not have clear-cut application, in any meaningful way. This needs to change, and quickly.
A fundamental understanding of how force majeure functions in the legal world is critical to developing and implementing the correct business strategies in the real world. Parties to contracts containing force majeure provisions must ensure that they are adequately availing themselves of the legal protections such provisions can provide. Conversely, parties that may be adversely affected by the invocation of force majeure by counterparties need to decide whether to assert legal challenges of their own or to negotiate alternative solutions. And parties to contracts lacking enforceable force majeure provisions must determine what other potentially viable bases may offer some measure of protection, whether from claims of breach, the business interruptions that can result from a counterparty’s nonperformance or both.
This article provides a brief but comprehensive overview of the concepts and challenges relating to force majeure in a COVID-19 world, along with additional considerations that all contracting parties should keep top of mind as current circumstances continue to evolve.