Supply chain delays are not just wreaking havoc on suppliers in Georgia. Many businesses have run afoul of their contract agreements with delayed or missing products due to unforeseen circumstances. For those businesses that did not have force majeure agreements to sufficiently remedy their breaches of contract, financial losses could be significant.
What exactly is a force majeure clause?
Force majeure provisions spell out the details of what should occur if either party cannot fulfill its contractual obligations as a result of unforeseeable events. It provides next steps in a “what-to-do-if” scenario. The resulting end allows the party who fails to perform a postponement or alternative delivery. The purpose, however, is not to bail him out, but to provide an additional way to fulfill his obligation.
Prior to these more recent supply chain disruptions, force majeure provisions were a matter of routine contract language. However, post a continuing world crisis, much more attention is being paid to leveling up this provision. When the economy was thriving, the importance of stipulated contracts with force majeure provisions was relatively understated. Now that businesses have felt the pinch of delayed or missing supplies, companies are reaching out to their legal departments to mitigate their losses should their ability to perform on their contracts be reduced. A carefully crafted agreement with strong force majeure language can do this and even prevent litigation.
The importance force majeure
Given the devastation that recent events have caused, the word “pandemic” will almost certainly be a part of force majeure language in future agreements. And the pandemic’s impact on businesses and the failure to meet contractual obligations because of it, contract language is evolving. Specifically referencing matters in contracts based upon the ongoing world catastrophes can also prove helpful for purposes of legal enforceability.
Tailoring force majeure language to a business’s particular needs should make the connection between the precipitating event and the company’s inability to make good on its promises. Bumps in business will always be a part of doing business. However, preparing your company beforehand for potential unforeseeable matters can go a long way in helping the business stay afloat during rough economic seas.
