Force Majeure Clauses Interpretation and COVID-19
This week the World Health Organization declared COVID-19, otherwise known as the coronavirus, a pandemic, and President Trump declared a national emergency. Rising concerns over the spread of the disease and resulting uncertainty, supply chain disruptions, and changes in consumer behavior dominated the news and social media and resulted in sharp declines in the financial markets and the suspension or cancellation of numerous events. As the world scrambles to respond to the coronavirus, businesses are considering what rights and remedies their existing agreements provide.
Many agreements contain a force majeure clause, which “allocate[es] the risk of loss if performance becomes impossible or impracticable, [especially] as a result of an event or effect that the parties could not have anticipated or controlled.” Evaluating the application of a force majeure clause requires assessing:
- How “force majeure” is defined (if at all) in the agreement.
- If a force majeure event has occurred, what rights or remedies are available?
