Force Majeure: Keeping and Breaking Contracts during Pandemic Crisis

With the Novel Coronavirus pandemic seemingly intent on disrupting our day-to-day lives both here in Israel and around the world, you’re likely to hear this phrase a lot in the coming days: “Force Majeure”. For those not fluent in legalese its meaning may not be immediately obvious but Aviv Lazar & Co. is here to explain.

Force Majeure is a concept in Contract Law which refers to the existence of situations where one of the parties to a contract is not able to perform its part of the agreement because of a situation which is out of its control.


Many contracts will include ‘Force Majeure clauses’ allowing an impacted party to legally suspend its obligation to provide a service or deliver goods during the period when the situation makes it impossible for them to do so (regardless of the impact it may have in both the B2B and B2C spheres of economic activity).


You may have heard other references to this idea such as phrases like “Acts of G-d” such as floods, droughts, earthquakes, and natural disasters in general; but the concept is broader and many such clauses include (but are not limited to) events such as terror attacks, armed conflicts, actions taken by governments or public authorities, accidents, labour disputes and last but certainly not least at the present time epidemic or pandemic diseases.

 

Here in Israel we can all no doubt think of business scenarios where this might be relevant with airlines cancelling flights due to immigration control restrictions, venues unable to host pre-booked events due to Ministry of Health restrictions on the size of gatherings, or the potential delay to the delivery of goods due to the slowdown in third-party suppliers ability to keep the supply chain operating at full capacity.


There are number of key issues which may impact you in this area:


Contract Terms – The most important issue when considering issues of Force Majeure and whether as a party affected by the impact of the Coronavirus is able to suspend its performance without any negative consequences will be the terms of the Contract itself.


When determining how to act or whether relief or compensation may be due to you at the present time the first port of call will be the terms of the agreement you’ve made with another party.


Governing Law – You may find your contract details a particular legal system which governs your relationship with the other party in the event it has an international dimension which can influence the rights you have when considering Force Majeure events.


So how can Aviv Lazar & Co. help further? In the event you’re a business unable to fulfil its obligations to other parties during the Coronavirus pandemic or you’re being negatively impacted by a supplier’s inability to provide you with goods or services you’re contracted to receive, please contact us for expert advice on the rights you have in your specific and unique situation and we will be pleased to support you through this difficult time.

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