Guide for Future Contract Negotiation

• Identify the risks involved in your business and negotiate how those risks can be allocated and controlled should they occur. Be specific.
• Are you trying to protect the feasibility of proceeding under the contract? Force majeure clauses do not generally cover a situation where it makes the obligation more expensive to perform and nothing else.
• Clearly define your force majeure clause, and when identifying specific triggering events make sure they are designated as a non-exhaustive list. Consider if there should be a time limitation on the existence of a force majeure event (for example, in a scenario where a government issues a shelter-in-place order, does this shelter-in-place need to be in effect for a certain minimum time frame in order to permit the party(ies) to utilize the force majeure clause).
• Make sure your force majeure clause includes a catch-all clause to cover other events or circumstances beyond the reasonable control of the party affected. This avoids a dispute over whether an event was "unforeseen" or "foreseeable".
• Identify what happens should one of the triggering events occur, and if they are different, specify the particular remedy for each triggering event. Make sure to consider (i) what will happen to the costs already incurred by either party (including services already provided and/or products already manufactured), and (ii) what will happen to the parties' obligations on a move forward basis.
• Are there alternative methods of performance and do you want to limit those methods?
• Do you want the clause to cover when performance is commercially impracticable, i.e., excessively difficult, expensive, or harmful?
• Describe the types of mitigation that are required in the event of a force majeure occurrence.
• What type of notice or condition precedent is needed or desired?
• Where will your venue and jurisdiction be? Specifying your local jurisdiction will likely save the company money and allow counsel of your choice to avoid travel.
• Do you want to include prevailing party attorneys’ fees in the event of litigation resulting from the force majeure clause?
• Do you want to impose time limitations or other conditions?
• Do you want to require a mediation before litigation can be instituted?

What else would you as the company want to cover under a worst-case scenario? Plan for the worst and hope for the best. Remember, when you are negotiating a contract, no one anticipates it to go poorly. This is the time to be specific and ask for what you want.

Partnering to Protect Your Business Operations

It is critically important that you become a part of the conversation with your lawyer about the types of unforeseen circumstances that could impact your business, so language can be tailored to address those items unique to your business. Different professions will have different issues, e.g., service and hospitality as compared to construction. Taking the time to analyze the "what ifs" and how those should be addressed in your contracts will have lasting effects.

Drafting the Contract

When drafting the contract, it is important to recognize that the more specific the language in the force majeure clause, the more likely it is that the court will enforce the clause as negotiated between the parties. Courts will narrowly interpret these clauses, which makes the time and effort put into drafting a clause pertinent to your business even more important. One thing is for certain: force majeure clauses will likely be forever altered and more heavily negotiated after the world has suffered through the COVID-19 crisis.