Montfort’s Litigation & Disputes team on the communications risks and opportunities around Force Majeure

Anyone who has been booked to attend an event over the last fortnight, has likely been a witness to the wave of widespread cancellations, brought about by the measures imposed to contain the coronavirus outbreak.

A huge number of contracts that were set to be delivered during this time will have fallen through. It follows that force majeure clauses have been on everybody’s mind. Over the coming months, it’s clear that practitioners will be called to advise on a range of contracts in relation to whether force majeure can be applied.

However, both the nature of force majeure clauses and the particular circumstances around the coronavirus outbreak mean that careful considerations must be applied when both issuing and defending these claims. One consideration that is paramount is the impact these claims could potentially have on reputation. In bringing or defending one of these claims, parties will need to have thought about answers to the following questions:

  • Why are you bringing this claim? When the virus has had such a universal impact, those who choose to pursue claims should expect to be asked what makes their case so special. It could be that there is a popular expectation that they should take the losses, as many others who cannot afford to pursue litigation will have to. Companies should be prepared to closely guard against accusations of opportunism.
  • Could this have been avoided? Businesses face being accused of not being sufficiently prepared for any eventuality if they need to invoke a force majeure clause. Competitors may attempt to suggest that this indicates their processes are not sufficiently robust. Furthermore, many companies will be facing up to the fact that the force majeure clauses were included in their contracts without a precise understanding the situation they would be used in; many may be worried about accusations that their contracts were not drafted with sufficient care.
  • What has been the wider impact of these cancellations? Many cancellations will impact stakeholders who will never be a party to the subsequent litigation: customers who went to shop in an empty store; the would-be attendees of a cancelled event; the tenants due to move into a building that was not completed on time. Social media has given each individual a public voice and a means to amplify it. Close attention will be paid to the efforts made by parties to communicate with and compensate these disappointed third parties.

It is clear that firms expect to see a surge in claims that rely on force majeure. As lawyers will have to assess the meaning of each contract individually, close attention will have the be paid to the reputational impact of every claim on a case by case basis.

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Reputation Management.

Global Expertise.