What if coronavirus infects your supply chain – FORCE MAJEURE revisited
A force majeure clause in a contract is a provision that excuses a delay or failure in performance due to events or circumstances outside the reasonable control of the person required to deliver that performance.
We’ve written about this subject before in the context of snow, foot & mouth disease, a strike by fuel tanker drivers and a shortage of carbon dioxide.
The subject arises again in relation to the effects of the Coronavirus on the supply chain, including shutting down production in China.
If you are under an obligation to supply and you find yourself unable to fulfil that obligation as you cannot obtain deliveries on account of the effects of the Coronavirus, will the force majeure clause in the contract come to your rescue? Or will you still be liable for the consequences of your failure to supply?
The answer is that it depends on the wording of the clause. Some clauses expressly include as force majeure events the effects of epidemics and pandemics. Other clauses do not expressly refer to these as force majeure events but use general wording such as “any event or circumstance outside the party’s reasonable control”; in that case it will be a matter of interpretation.
Little attention is paid to this type of clause when a contract is being negotiated. But events like this remind us how important they can be.Back to Our Thinking →