“Events, Dear Boy, Events!”
March 10, 2020
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A quote that is overused and may have been mis-attributed to former Prime Minister, Harold Macmillan but is said to have been his response to being asked what he most feared as PM.
We are certainly seeing some ‘events’ at the moment and their impacts can be felt in business circles across the Globe.
Clients often wonder why their lawyers spend so much time and effort writing the ‘small print’ in B2B contracts.
Force Majeure clauses are generally included in the small print. They are clauses designed to relieve one or more parties from specific contractual obligations if they are effectively prevented from performing them by the occurrence of specified external events.
Very few clients will have had reason to study them, but now seems like a good time to do so.
The combined impact of, first, Brexit and now the Coronavirus (Covid-19) means that suppliers may find it increasingly difficult to meet their existing contractual obligations. One option they will be looking at will be to escape their obligations, arguing that one or more of these events has made it impossible for them to meet their obligations.
In China, for example there are indications that thousands of suppliers are claiming that the Covid-19 outbreak has made supply impossible. China is of course not the only country affected and we can expect to see a rapidly growing number of such claims in Europe and the rest of the World.
If your supplier writes to you invoking the Force Majeure clause what should you do?
The obvious first step is to read the clause carefully. If there isn’t an express Force Majeure clause that you can identify then the supplier may be out of luck because English law will not normally ‘imply’ one.
Assuming there is an FM clause, what exactly does it say and how does the supplier’s notice to you, invoking the clause, describe the event they say has triggered force majeure? This is important because they will have to show (i) that the specific event or type of event at least is covered by the FM clause and (ii) that the event has in fact prevented them from meeting their obligations. Any court looking at the claim would carry out a detailed factual analysis.
If you are in receipt of a force majeure notice and are not certain how to respond (or indeed if you are a supplier facing real problems as a result of external events) it is best to obtain specialist legal advice on what contractual rights you might have and how best to exercise them.
This note is a summary for guidance purposes only and should not be treated or relied on as legal advice. Always obtain legal advice on your particular circumstances.