Contract Management - What Part is the Force Majeure Clause Playing in the Coronavirus Crisis?
22 April 2020
Force majeure is likely to play a significant role in the procurement and supply chain profession for the foreseeable future, with some experts predicting years of litigation ahead to determine the legitimacy of claims made during the coronavirus outbreak. Whether you have received or issued a declaration of force majeure, a simple way to support and verify your response is to thoroughly document the process.
If you cannot fulfil a contract you should identify precisely why this is the case and gather sufficient evidence to prove this. In the event that your supplier cannot supply, request specific evidence of why before accepting or responding. This also applies to the steps you take to mitigate damage and continue operations; a successful force majeure claim will require you to prove that reasonable efforts had been made to overcome the problems, and how these proved unsuccessful.
Depending on the guidance in your location, you may be required to invoke force majeure at the earliest sign of financial difficulty - perhaps before you are fully prepared - or may be obliged to issue a notice to your customers as soon as your own supplier submits a claim to you. Therefore, it is important to consider different scenarios and to use broad terms when drafting a declaration of force majeure if the situation is still evolving.
Governing law and contract law differ greatly across countries and regions, and some countries do not recognise force majeure at all. Therefore, it is recommended to obtain legal guidance on any contracts under question to understand the variances before taking action. This applies to your suppliers and all individual contracts you may be unable to fulfil as a result.