Defining Force Majeure Events in a Post-COVID World

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

The term ‘force majeure’ is derived from French civil law and describes a natural or man-made event outside the control of the parties to a contract, which prevents one or both from performing their obligations under the contract. As we have experienced during this unprecedented time of global pandemic, it is vital for those in business - lawyers, business owners, and executives alike - to understand the legal implications of force majeure events and their potential effects on contracts.

At its most basic definition, force majeure events can lead to contract suspension, termination or renegotiation. If a contract is suspended or terminated due to a force majeure event, there may be costs that cannot be recovered. However, if the parties agree to renegotiate their contract terms in light of changing circumstances (such as those imposed by government public health measures), there may be more beneficial outcomes for both sides.

To ensure protection for businesses in this post-COVID world then it’s essential that any contracts contain comprehensive clauses regarding force majeure events. Analyzing such clauses -both by understanding how they are interpreted by applicable law as well as considering the specific circumstances surrounding them - will help minimize losses while protecting important relationships with clients and suppliers alike.

For those seeking further guidance on interpreting these clauses in contracts today can take advantage of Genie AI’s open source legal template library – an extensive dataset teaching AI what an up-to-date market standard version looks like – without having to pay costly lawyers’ fees; allowing anyone access to customize high quality legal documents quickly and effectively. To read more on our step-by-step guidance or access our template library today click here…

Definitions (feel free to skip)

Force Majeure: An event outside of the control of the parties, which prevents them from fulfilling their contractual obligations.
Core Principles: The general rules for determining if an event is a force majeure event, such as being unforeseeable and unavoidable.
Force Majeure Clause: A clause in a contract that outlines the events that are considered to be a force majeure event.
Implications: The possible effects or consequences of an event.
Contractual Obligations: The duties and responsibilities that two or more parties have agreed to in a contract.
Risk: The chance of something bad happening.
Mitigating: Reducing the impact or severity of something.
Legal Advice: Professional advice or assistance given by a lawyer.

Contents

• Definition of a Force Majeure Event
• Understanding the Core Principles of Force Majeure
• Analyzing the Force Majeure Clause in Contracts
• Implications of Force Majeure Events
• Contractual Obligations
• Identifying and Mitigating Risk
• Best Practices for Communicating with Customers
• Seeking Legal Advice
• Updates on New Regulations and Laws regarding Force Majeure Events
• Establishing a Force Majeure Response Plan

Get started

Definition of a Force Majeure Event

• Understand the meaning of force majeure and how it applies to contracts
• Review existing contract language to determine what constitutes a force majeure event
• Identify any gaps in existing contract language and revise as necessary
• Consider any new or novel events that may have arisen as a result of the COVID-19 pandemic
• Determine how to address force majeure events in any future contracts

When you can check this off your list:

• When you have a comprehensive understanding of the meaning of force majeure and how it applies to contracts
• When you have reviewed existing contract language and identified any gaps
• When you have considered any new or novel events that may have arisen as a result of the COVID-19 pandemic
• When you have determined how to address force majeure events in any future contracts

Understanding the Core Principles of Force Majeure

• Understand the concept of force majeure and the circumstances in which it applies
• Research the applicable force majeure laws in the applicable jurisdiction
• Analyze the language used in the force majeure clause in the applicable contract
• Identify any additional considerations that may be applicable due to the COVID-19 pandemic
• Be aware that the interpretation of force majeure clauses is often a fact-sensitive inquiry

Check off when you have conducted the research and identified all of the applicable considerations.

Analyzing the Force Majeure Clause in Contracts

• Review the force majeure clause in all applicable contracts to determine if the COVID-19 pandemic is a force majeure event
• Analyze the clause to determine if the event is defined and/or if it is covered by the clause
• Identify any limitations or restrictions that may apply to the force majeure event
• Make a list of the contracts and their force majeure clauses

You can check this step off your list and move on to the next step when you have reviewed all applicable contracts and made a list of the contracts and their force majeure clauses.

Implications of Force Majeure Events

• Determine whether the current COVID-19 pandemic can be classified as a force majeure event
• Assess the potential financial and legal implications of a force majeure event
• Identify potential risks and liabilities that may arise from a force majeure event
• Understand how to mitigate risks associated with a force majeure event
• Analyze how a force majeure event may affect contractual obligations

Once you have analyzed the implications of a force majeure event, you can move on to the next step, which is to analyze the contractual obligations associated with a force majeure event.

Contractual Obligations

• Consult and understand current contractual obligations that could be impacted by a Force Majeure event.
• Analyze current and anticipated contractual obligations to identify potential Force Majeure events.
• Document the potential Force Majeure events in the contract and any contingencies that would need to be taken to address these events if they were to come to fruition.
• Consult and understand any current or proposed legislation that could impact contractual obligations.
• Consult with legal counsel to ensure the Force Majeure clause is valid and applicable to the contract.

When you have reviewed and documented the contractual obligations, potential Force Majeure events, and any applicable legislation, you can move on to the next step: Identifying and Mitigating Risk.

Identifying and Mitigating Risk

• Review contracts and identify clauses related to force majeure events
• Evaluate risk factors associated with specific clauses and consider whether additional protections are needed
• Consider methods for mitigating risk, such as insurance coverage and performance guarantees
• Draft and implement new, or adjust existing, policies and procedures to reduce the risk of force majeure events
• When the risk of force majeure events has been identified and mitigated, check this step off the list and move on to the next step.

Best Practices for Communicating with Customers

• Develop a clear and transparent communication plan for customers that includes the following:
• Explanation of the force majeure event
• Outline of potential implications
• Reassurance of commitment to quality and customer service
• Draft your message and ensure that it is compliant with applicable laws and regulations.
• Consider using a variety of communication channels (email, website, social media, etc.) to reach your customers.
• Make sure to include contact information for customer service in your message.
• When your message is ready, send it out to your customers and post it on your website.
• Monitor customer feedback and address any concerns or questions that arise.

You’ll know when you can check this off your list and move on to the next step when you have successfully sent out your communication plan to your customers and have received no major pushback or questions.

Seeking Legal Advice

• Consult a lawyer to ensure that you are up to date on applicable laws and regulations
• Ask the lawyer to review your contracts and agreements to help you identify any potential force majeure events
• Ask the lawyer to provide advice on how to negotiate with customers who may be affected by the force majeure event
• Ask the lawyer to provide advice on how to handle any disputes related to a force majeure event
• Once you have received and reviewed the advice from the lawyer, you can move on to the next step.

Updates on New Regulations and Laws regarding Force Majeure Events

• Stay up to date on new regulations and laws related to force majeure events in your jurisdiction and industry.
• Keep track of changes in case laws that may affect the interpretation of force majeure.
• Review agreements to see if they are impacted by the new regulations and laws.
• Determine any contractual changes that may be necessary due to the new regulations and laws.
• Sign up for notifications from relevant government agencies and industry sources regarding changes in regulations and laws.
• Check off this step and move on to the next step when all updates on new regulations and laws regarding force majeure events are identified and accounted for.

Establishing a Force Majeure Response Plan

• Assemble a team to create the response plan: Identify key stakeholders and personnel who should be part of the team to create the response plan.
• Establish the objectives of the response plan: Outline the goals and objectives of the response plan, such as when it should be implemented and how it should be communicated to all stakeholders.
• Set expectations: Decide on the expected timeline and outcome of the response plan.
• Draft the response plan: Write the response plan in clear language, detailing the steps to take in the event of a force majeure event.
• Get approval: Ensure the response plan is approved by all parties involved.

You can check this off your list and move on to the next step when the response plan is drafted, approved, and ready to be implemented.

FAQ:

Q: What is the difference between Force Majeure in UK, USA and EU jurisdictions?

Asked by Mason on April 13th 2022.
A: Force Majeure is a common law concept which is applied differently in different jurisdictions. In the UK, Force Majeure is used to refer to events outside of a party’s control which prevents them from performing a contractual obligation. This could include natural disasters, civil unrest, pandemics, or other extraordinary events which are not reasonably foreseeable and prevent one party from fulfilling their contractual obligations. In the US and EU, the concept may be referred to as Act of God or similar, but will generally have similar principles.

Q: What specific steps can my business take to define Force Majeure events in our contracts?

Asked by Lillian on October 18th 2022.
A: The best way to define Force Majeure events in your contracts is to be as specific as possible. When drafting your contracts you should consider all potential events that may constitute a Force Majeure event, such as pandemics, civil unrest or natural disasters. You should also define any specific requirements needed to invoke Force Majeure such as providing notice of the event and its effect on your contractual obligations. It is important to remember that each situation will be different and the effects of Force Majeure need to be reviewed on a case-by-case basis.

Q: How do I know whether a Force Majeure clause applies in my particular industry or sector?

Asked by Aiden on January 24th 2022.
A: Depending on the industry or sector you are operating in, there may be specific elements of a Force Majeure clause that apply only to your particular sector. For example, if you are operating in the technology sector then you may need to consider potential software bugs or cyber-attacks as potential triggers for invoking a Force Majeure clause. It is important to review the relevant legislation or regulations applicable to your sector in order to determine what exactly constitutes a Force Majeure event for you.

Q: How do I know if my business model (SaaS, Technology or B2B) requires a Force Majeure clause?

Asked by Emma on June 11th 2022.
A: Generally speaking, if your business involves entering into contracts with other parties then it is likely that you will require some form of Force Majeure clause in your contract. This is particularly true for businesses operating in the technology sector since software bugs or cyber-attacks could constitute a Force Majeure event which would affect your contractual obligations. Similarly, if you are engaging in any kind of business-to-business activities then it is likely that you will need some form of Force Majeure clause in your contract in order to protect yourself from being unable to fulfil your obligations due to an unexpected event beyond your control.

Q: What should I do if an event does trigger my Force Majeure clause?

Asked by James on September 5th 2022.
A: If an event does occur which triggers your Force Majeure clause then it is important that you act quickly and take all necessary steps to protect yourself and your business from any potential losses or liabilities arising from the event. You should notify all relevant parties immediately and provide detailed information regarding the event and its effect on your contractual obligations. You should also ensure that all necessary steps are taken to mitigate any losses incurred by either party as a result of the event and review all relevant legislation or regulations applicable to your particular industry or sector in order to ensure compliance with all applicable laws and regulations.

Example dispute

Lawsuits Involving Force Majeure Events

• A plaintiff could raise a lawsuit in which they reference a force majeure event if they feel that their contract partner failed to uphold their contractual obligations during the force majeure event.
• The plaintiff would need to provide evidence that their contract partner had failed to uphold their obligations, such as through a breach in the terms of the contract, or through a failure to abide by the relevant civil law.
• The plaintiff would also need to provide evidence of how the circumstances constituted a force majeure event.
• The plaintiff could seek settlement in terms of damages, including financial compensation, or they could seek to have the original contract terms reinstated.
• If damages are sought, the plaintiff would need to provide evidence of how the damages were incurred, and how they should be calculated.

Templates available (free to use)

Force Majeure Event Notice

‍