From Tariffs to Tornadoes: Expect the Unexpected

From Tariffs to Tornadoes: Expect the Unexpected

Force majeure. Really rolls off the tongue, huh? Sounds a bit gentler than “Act of God” (or governments…), but whatever you call it, the unthinkable likely can and will cause significant disruptions to your bottom line. A well-drafted force majeure clause is critical, especially given the current economic climate. Read on to learn how careful word choices can help you focus on your work and spend less time stressing over the supply chain, or lack thereof.

What is a Force Majeure Clause?

Force majeure is French for “superior force,” and in the legal context, refers to events beyond a party’s control. A force majeure clause essentially excuses a party’s contractual performance when failure to perform (or, a breach) is caused by an unforeseen event beyond that party’s control. Some force majeure clauses are incredibly detailed and include a long list of events that would be considered unforeseeable/beyond a party’s control. The most common example? Weather. You can plan a pretty picnic, but you can’t predict the weather, and that applies in contracts as well. 

We have a feeling that, given the current landscape, folks will start updating their force majeure clauses to clearly list governmental actions, executive orders, and tariffs as covered events. Those who don’t may be left holding the bag when supply chain issues impact their ability to deliver…literally.

A COVID-19 Case Study (Eek!)

The COVID-19 pandemic was one of the most recent unforeseen events that impacted our economy on a global scale and may have changed our approach to force majeure forever. What was once a boilerplate term became absolutely critical. During the pandemic, companies realized that their force majeure clauses did not list pandemics, epidemics, or even global disasters as covered events. In the beginning, companies quickly started adding things like lockdowns, quarantines, executive orders, governmental orders, shelter-in-place orders, and really anything and everything that we saw during the pandemic as covered force majeure events to their contracts. Later on, we saw creative arguments as well, where parties argued that a contract listed “pandemic” but not “COVID-19,” and that the COVID-19 pandemic itself couldn’t possibly be an “unforeseeable” event since we all, at that point, knew that future quarantines, lockdowns, and supply chain issues would be foreseeable after the first lockdown.

What. A. Mess.

Let’s discuss how to best avoid this mess, shall we?

Key Force Majeure Considerations

A carefully and creatively drafted force majeure clause will have precise language that considers the realities of your industry and the various pain points that you may come across. Supply chain issues will be a huge consideration, given the global sourcing and freight volatility issues that we are seeing play out in real time. Ideally, a force majeure clause gives you a framework for how to navigate these kinds of unforeseen issues. Whether it’s ensuring that you have additional time to deliver, or giving the parties the ability to mutually walk away without penalty if a force majeure event causes delays that just aren’t able to be resolved, it’s important to think about the “unthinkable.”

No matter what happens, anticipated or not, we’ll weather any storm together, because as always, if you’ve got questions, you know we’ve got answers!

~ The W + K Team