March 25, 2021 Articles

The Importance of Force Majeure Clauses in the COVID-19 Era

One year after the pandemic started, case law developments provide cautionary lessons.

By Paula M. Bagger

Not that long ago, the force majeure clause risked being dismissed as a laundry list of potential catastrophes, each unlikely to happen, embedded in the boilerplate at the back end of a commercial contract. Then came 2020, and force majeure came to the fore as COVID-19 and governmental shutdowns wreaked havoc with commercial leases and contracts. Disruption led to litigation, and a growing awareness that we must not ignore the potential applicability of force majeure to our commercial agreements. One silver lining is that the early case law provides cautionary lessons on what we need to consider about force majeure when drafting and interpreting commercial contracts.

Force Majeure

A force majeure clause allocates the risk of loss if performance is hindered, delayed, or prevented because of an event that the parties could not have anticipated or controlled. It provides a contractual defense, the scope and effect of which will depend on the express terms of a particular contract. These terms may have been negotiated, if the parties took the time to tailor the clause to their specific transaction, but they often are boilerplate.

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