Force Majeure Contract Provisions Amid the COVID-19 Pandemic

Force Majeure Contract Provisions Amid the COVID-19 Pandemic

As COVID-19 puts pressure on companies trying to comply with their contractual obligations, it is time to take a look at the provision that might excuse performance: the Force Majeure provision.  This provision works to excuse parties from performing their obligations when an unforeseen event occurs.  COVID-19 may fall right into the description of that unforeseen event, but whether a party can take advantage of performance excusal depends on the Force Majeure provision itself.  Given the ever-changing landscape around COVID-19,organizations may want to consider the following to understand what terms come into play for a Force Majeure event:

1.     Review Your Force Majeure Provision

What events are covered?

Look at the events listed in the Force Majeure provision.  Most Force Majeure provisions state that Force Majeure events occur when the event is “beyond the party’s control.”  If an organization is claiming Force Majeure, it should be prepared to make the argument that federal and state mandates pursuant to COVID-19 are beyond its control.  If specific events are listed in the provision, organizations should review whether the event aligns with COVID-19.  For example, “acts of God,” public health emergencies, epidemics, or pandemics maybe listed. It is worth noting in light of the COVID-19 pandemic that a virus/bacteria may be excluded if it is a contract for health-related services.

Are any events carved out?

Review whether any specific events are carved out of the provision.  Savvy contract drafters will carve out certain events that are more likely to impact performance for the specific services being provided to ensure the performance is not excused.

How is the event triggered?

The occurrence of Force Majeure events does not necessarily trigger the provision.  Some provisions may require formal declarations from federal or state entities declaring emergencies.  Organizations should evaluate whether the Force Majeure provision has any such prerequisites for excusing performance.

It is also possible that reactions to COVID-19 will greatly frustrate an organization’s performance,rather than making it so impossible that the performance is excused under a Force Majeure provision.  In these cases, there is no clear-cut answer of how to handle, so the parties will need to work together to come up with solutions that make complying with contractual obligations easier.

2.     Review Requirements for Claiming Force Majeure

The contract may include specific deadlines and notice requirements for claiming Force Majeure. Organizations should review the requirements for making such a claim to avoid missing the relevant window of time.

3.     Consider Contracts Being Currently Negotiated

If an organization is in the middle of negotiations for an agreement, it should review the Force Majeure provision and consider adjusting to contemplate complications arising from COVID-19.  The organization can also consider adding additional termination rights or longer periods for cure to combat further fallout from the virus.

Our Beckage Team continues to closely monitor the legal and business implications associated with the COVID-19 pandemic.  It is critical that companies align with experienced counsel to proactively assess their existing contractual obligations and the obligations of their counterparts.  The Beckage Team can help assess liability coverage, using their expertise to help map out a nuanced cyber liability insurance plan for your business in the event coverage is needed.  

*Attorney Advertising: Prior Results Do Not Guarantee a Similar Outcome

Subscribe to our newsletter.

circuit boardThe Importance of an Incident Response Plan

The Importance of an Incident Response Plan

As recent news headlines confirm, data breaches continue to be a threat to companies regardless of size. From reputational harm, disruption to your daily business, to significant monetary penalties and litigation, the potential consequences of a data breach are significant. It is more important than ever that companies evaluate their cybersecurity readiness plan, from policies and procedures to privacy concerns under the GDPR to ensure they are ready if a breach occur. While there is no one-size fits all approach to preventing data breaches, there are many best practices companies can employ to help minimize the risk of being breached. From regular conducting risk assessments and inventorying of the data that you collect to developing and testing your incident response plan, preparation is the name of the game. One component of your data security program, an Incident Response Plan, is an important step you should have in place to help mitigate and contain an incident if one occurs.

What is an Incident Response Plan?

An Incident Response Plan sets forth the company’s procedure for identifying, reporting and responding to an incident should one occur. It ensures that everyone is on the same page if a data breach happens. At a minimum, here are some key elements that an Incident Response Plan should include:  

   1) Policy scope and definitions.

   2) Identify Incident Response Team Members and outline roles for each.

   3) Outline procedures for identifying, reporting and responding to an incident.

   4) Set forth the legal obligations for reporting and notice to potentially impacted persons.

   5) Identify how often the Incident Response Plan will be reviewed and updated.

   6) Post-incident analysis procedures.

Developing an Incident Response Plan is not the end of the road, however. Your Incident Response Plan is a living and breathing document and the best way to know if it actually works is to test it consistently. Simulated cyber incidents that force your company to work through the procedures in your plan must be tested, gaps fixed, and improvements made. Simulated incidents with counsel are ideal to help identify legal risks along the way and help put the company in a legally defensible position.

It is very important to have your Incident Response Plan reviewed by Legal Counsel to ensure it satisfies your legal obligations under various state, federal and international laws. Beckage attorneys are fully equipped to help you navigate this process and help reduce your risk and exposure should a data breach occur.

DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or practitioner licensed to practice in the jurisdiction where that advice is sought.