Force Ma What?
By now your business is likely feeling the effect of COVID-19. The pandemic is disrupting businesses globally with a disabling impact on small businesses. Many small business owners are scrambling to stay afloat and find relief. I direct you to your business contract(s). It may be time to enforce your contractual rights.
Every business, no matter its size, should operate with a customized contract designed to protect its interest. The contract should include options to terminate the contract among other remedies. If your business has existing purchase orders, scheduled deliveries, a cleaning contract, etc. and your business is closed or unable to operate at normal capacity review your contract(s). Review your contract to determine your right to amend the contract, right of termination, and look deep into all the legal jargon for a force majeure clause.
A force ma what? A force majeure clause. A force majeure clause is a contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible. A force majeure clause, as law students learn it, is applicable when there is "an act of God" and can be enforced upon the occurrence of an unexpected event such as hurricanes, floods, earthquakes, war, terrorism, civil disorder, labor strikes or disruptions, fire, disease or medical epidemics or outbreaks.
What is the benefit? If your contract has a force majeure clause you may be able to exercise your contractual right of nonperformance due to COVID-19. Depending on the specific clause in your contract, you may be able to cancel the entire contract without penalty. Force majeure clauses come in all shapes and sizes. The clause can carve out specific occurrences such as a hurricane or labor strikes, etc. It is important to review your specific contract to determine what options are available.
Where to find it? Force majeure clauses are usually found in the "boilerplate" section of a contract. Meaning, the last section that usually includes other clauses such as "Choice of Law," "Severability," and "Entire Agreement."
What if your contract does not have a force majeure clause? Your contract likely has a force majeure clause. It is one of those clauses that are usually always thrown in. You know, just in case. If your contract does not have a force majeure clause there are some common law doctrines that may be of assistance. Including "impracticability" and "frustration of purpose."
The key is to review your contract and see what contractual rights are available to you.