Coronavirus and Commercial Contracts – When Boilerplate Language Matters

With all the media attention, most everyone realizes how coronavirus COVID-19 affects their daily lives such as travel plans, cleaning supply shortages, and retirement investments, but few probably grasp the impact on commercial agreements. Many commercial agreements, especially supply agreements, have a boilerplate clause called force majeure (historically called “Acts of God”) which has often been overlooked, but now may become critical as to whether one party can legally breach the contract. Each circumstance is fact-specific and depends on the agreement’s specific provisions as to whether a force majeure non-performance is allowed, but generally, the concept is that a party is not required to perform if the performance becomes impossible, onerous, or difficult because of circumstances outside of the control of the non-performing party. A few examples of possible force majeure events related to coronavirus are government restrictions on goods being shipped internationally, workers being quarantined to their homes and unable to work, and necessary raw materials being unable to be procured because of logistic restrictions.