As the impacts of the coronavirus (COVID-19) reverberate through the economy, local companies would be wise to consider, and to prepare for, legal issues important to managing the business fallout from the virus. We touch on a sample of these legal issues below: (1) force majeure provisions, (2) business interruption insurance, and (3) employment law issues.
Force majeure clauses are often found tucked away in the “miscellaneous” provisions of commercial contracts — most often found in supply or sales contracts. Simply stated, a force majeure clause may excuse one party’s failure to perform its obligations under a contract if the failure is the result of events or circumstances outside of that party’s control. The classic example of a force majeure clause is a natural disaster that delays a party’s performance under a contract. However, courts have also applied force majeure clauses to business disruptions caused by former disease outbreaks, such as SARS. Determining whether a force majeure clause in one of your contracts excuses your performance, or the performance of a counterparty will require a consideration of contractual language and circumstances unique to each business and each contract. Nevertheless, what we can say is that conversations about coronavirus and contractual excuse are happening around the country right now, so thinking about impacts to your business may be a sensible use of time and resources. In the context of agreements for the sale or purchase of products rather than services, your rights may also be impacted by statutory concepts like the doctrine of “impracticability” in the Uniform Commercial Code which may excuse the delay or non-delivery by a seller of goods.