It really is difficult to get your arms around the sweeping legal & business implications of the coronavirus epidemic. A Cleary Gottlieb memo picks up on one of the topics alluded to in the Nelson Mullins memo – the potential inability of companies to perform their contractual obligations due to the impact of the epidemic on supply chains. This excerpt addresses the potential availability of the “force majeure” clause to provide relief from contractual liability:
Force majeure clauses seek to define circumstances beyond the parties’ control which can render performance of a contract substantially more onerous or impossible, and which may suspend, defer or release the duty to perform without liability. They can take a variety of forms but most list a number of specific events (as well as more general ‘catchall’ wording to make clear the preceding list is not exhaustive) which may constitute a “Force Majeure Event” and excuse or delay performance, or permit the cancellation of the contract.
Matters such as war, riots, invasion, famine, civil commotion, extreme weather, floods, strikes, fire and government action (i.e. serious intervening events that are outside the control of ordinary commercial counterparties) are typically included within the scope of Force Majeure Events.
The memo reviews how courts in the U.K., the U.S. & France have interpreted these clauses, and discusses how common law doctrines of frustration and impossibility of performance may come into play in situations involving U.K. or U.S. contracts. It also touches on the right of parties to contracts entered into after October 1, 2016 under French civil law right to renegotiate those contracts based on a change in circumstances.
-John Jenkins, TheCorporateCounsel.net February 25, 2020
