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Contracts and the Coronavirus Crisis: Force Majeure Provisions

Posted 03/23/20 2:09 PM by Legility

As we navigate the unchartered waters that COVID-19 presents, new business and legal challenges emerge. This is especially true in the case in the world of contracts. It is no longer “business as usual” with all of the delays, cancellations, remote working arrangements, and in preparing contingencies regarding the health of leaders and employees.

 

This is when a thorough understanding of force majeure clauses becomes business-critical.

 

 

What are Force Majeure Clauses?

 

Force majeure clauses allocate risk between parties and are present in contracts of all kinds, ranging from leases, procurement contracts, vendor contracts, and supply agreements to M&A agreements, employment agreements, service contracts and construction agreements. 

 

With the immediacy of the evolving COVID-19 situation, companies must be able to efficiently assess their exposure and risk with a consistent, quality-driven process. Questions legal teams and business stakeholders should be asking include:

 

     - How many of our contracts contain these clauses?

     - How is each clause different?

     - How does the pandemic fit within these provisions?

 

A fast review, capture and abstraction process can give companies the ability to not only discover actionable information in their contracts, but also the time necessary to develop and implement legal strategies and business continuity plans to weather the current environment. 

 

Force Majeure Contract Abstraction: Best Practices

 

To conduct a targeted contract review and analysis of force majeure provisions, we use small teams of experienced commercial contracts attorneys and, where appropriate, robust artificial intelligence technology. This powerful combination allows Legility to quickly identify force majeure provisions, analyze whether the provisions include language that may excuse performance for disease, epidemic, or pandemic, report the same to our clients in real time, and if necessary, assist in the notification of counterparties regarding such provisions. This a two-step process:

 

Step 1: Review, Capture, Abstract

  •      - Identify if contracts include force majeure provisions of any type;
  •      - Abstract force majeure provisions and identify language which may apply to COVID-19 pandemic;
  •      - Abstract party name, notice provision, address fields; and
  •      - Set up the fields to create a mail merge

Step 2: Reporting and notification of counterparties

 

Once Legility attorneys divided the contracts into “those with potentially actionable force majeure provisions” and “those without potentially actionable force majeure provisions,” the work of noticing counterparties begins. Legility assists clients in:

 

  •      - Sending out appropriate notices to trigger relevant provisions
  •      - Tracking sending, receipt, and responses to notices
  •      - Negotiating with counterparties regarding force majeure notices

 

Legility tracks the sending, receipt and responses to such notices and reports the same to our clients in real-time. Legility attorneys are further available to assist our clients in negotiations with counterparties regarding force majeure notices.

 

We hope you are safe and healthy, and will continue to be. If there’s anything we can do for you during this increasingly challenging time, please contact our expert team:

 

     - Mona Maerz

     - Lee Holcomb

     - Eric Schultenover

     - Jon Sharpley

 

Learn More

 

Legility

About The Author

Legility, a leading provider of technology-enabled legal services, provides consulting, technology, managed solutions, and flexible legal talent to corporations and law firms. The company has more than 1,000 lawyers, engineers, consultants, technology and data specialists, and operational experts serving more than one-third of the Fortune 100 and one-quarter of the Am Law 200. Legility helps its clients improve operational efficiency. By combining people, processes, and technology, Legility offers innovative and bundled solutions that align with how the legal market is increasingly looking to engage. www.legility.com

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