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Force Majeure In The Time Of Coronavirus

Companies may want to consider this legal option

COVID-19, commonly known as coronavirus, is causing an epidemic of respiratory illness in more than 60 countries. With the mandatory quarantines and the closure of many businesses, including manufacturing facilities and suppliers, the impact on the supply chains and operations will be enormous in the short term. With no end to the coronavirus outbreak in sight, companies may want to consider force majeure as a legal option to mitigate the impact of the crisis on their business.

What is force majeure?

Force majeure refers, as most readers here know, to a legal doctrine under which a party may be relieved from liability for non-performance when “acts of God,” such as floods, earthquakes, tsunamis, drought, government restrictions or other extraordinary circumstances beyond the party’s control prevent fulfillment of contractual obligations.

A typical force majeure clause will require that the disruption of performance be beyond the invoking party’s reasonable control and that the event was not reasonably foreseeable. A force majeure clause usually lists several categories of events that could impact suppliers and customers across the supply chain, steps that the party invoking force majeure must take, as well as the legal consequences in the event of a force majeure event. While most force majeure provisions are unlikely to list disease, epidemics, or quarantine specifically, many include general provisions covering such things as natural disasters, “acts of God,” acts of government or “other circumstances beyond the parties’ control.”

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