‘ Force Majeure’ – - PowerPoint Presentation

1. ‘Force Majeure’ – Importance under Covid-19 Era BY: BHAWANA KHANWANI

2. INTRODUCTION - What is LawCorrelation Between Society & Law Contract Law – Arrangements or Agreements in daily phase of Life Boilerplate Clause under Contracts – Standard, General & Misc.

3. FORCE MAJEURE French for ‘SUPERIOR FORCE 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. These clauses generally cover both natural disasters and catastrophes created by humans. In the absence of a force majeure clause, parties to a contract are left to the mercy of the narrow common law contract doctrines of "impracticability" and "frustration of purpose," which rarely result in excuse of performance. SAMPLE FM Clause: Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to any of the following causes (which causes are hereinafter referred to as “Force Majeure”), to the extent beyond its reasonable control: acts of God, accident, riots, war, terrorist act, epidemic, pandemic, quarantine, civil commotion, breakdown of communication facilities, breakdown of web host, breakdown of internet service provider, natural catastrophes, governmental acts or omissions, changes in laws or regulations, national strikes, fire, explosion, or generalized lack of availability of raw materials or energy. For the avoidance of doubt, Force Majeure shall not include (a) financial distress nor the inability of either party to make a profit or avoid a financial loss, (b) changes in market prices or conditions, or (c) a party's financial inability to perform its obligations hereunder. In some jurisdictions, there are three tests to determine whether a force majeure defense is applicable: The event must be unforeseeable, external, and irresistible.

4. FORCE MAJEURE – IN COVID -19 ERA FM is hot topic during March 2020 – initial of Covid – 19 PandemicParties to Contract – Interested in Dusting off their Boilerplate Provisions to excuse their performance under contractual obligations.Courts 3-step interpretation approach: 1. Looking specific language of FM clauses and how clause events constituting FM 2. Whether the defined event actually caused the delay or nonperformance of the contract 3. Finally, courts will look at what relief your force majeure clause provides.  Court adopted Strict and Fashion Relief Approach

5. AFTERMATH & LEARNINGS Interpretation of force majeure clauses remains somewhat unpredictable. One key takeaway is, that prior to the COVID-19 pandemic, force majeure clauses were often sloppily written and failed to allocate risk in a manner acceptable to the contracting parties. Where these clauses were often boilerplate and repurposed from agreement to agreement, contracting parties spent little to no time writing or negotiating them.Parties should consider whether the impact of an event truly prohibits their performance before seeking excusal from a contractual obligation, particularly in pre-2020 agreements. Businesses and customers alike have realized the effects of a poorly drafted force majeure clause with countless examples of the loss of significant sums of money. With the realities of the last two years upon us, parties entering into contracts should be sure to review and update their force majeure clauses to ensure their long-term viability.Going forward, when drafting force majeure clauses, parties may need to decide whether a catch-all provision would be effective in the advent of an unforeseen calamity. Additionally, when necessary, parties may need to enumerate the types of events a force majeure clause should include, as well as the specific types of events the clause is not intended to excuse.

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