What should you do if your company has to invoke force majeure against the supplier or customer? As an entrepreneur, you deliver either goods or services. You may be exposed to your supplier not delivering under contract or you may be required to invoke the force majeure clause in order to avoid damages.
What is force majeure?
Force majeure is a so-called excusable breach of contract – a breach of contract caused by external force. An example of external force where force majeure has been to be considered is the tsunami that caused the Fukushima nuclear accident.
To avoid liability in contractual situations, you must not be able to repair the damage in a different way, such as finding another product from another supplier. Force majeure is not a given, it is a situational issue to be resolved together with a lawyer in order to examine the signing of the contract – it all depends on how the contract is written in order to assess whether force majeure can be considered to exist. Whether force majeure can be invoked also depends on the industry you are in and whether it is goods or services the contract applies.
If a supplier invokes force majeure against you
If a supplier invokes force majeure against you because the product or service cannot be delivered, it all depends on what is in the contract. The supplier may be obliged to have a backup plan if, for example, the product could not be produced in China. If the important products are, there should be a backup plan for their suppliers, that is the question of how the contract is written.
If a customer claims force majeure against you
If a customer claims force majeure against you, he/she must do so in writing. You’ll have to discuss how to solve the problem. All trades entered into are a way of creating value and it is of great importance to have good communication with their suppliers and customers in order to solve problems that arise in the best possible way.
It is not possible to perform a force majeure for a non-delivery of goods due to Coronavirus. All factors must exist in order for force majeure to be invoked – therefore a lawyer is in this case. The Corona virus is an infectious virus that is generally not usually included among infectious viruses in contracts – it is usually formulated in the style of unforeseen events that can affect a party.
If your company needs to invoke force majeure against the customer or supplier.
Has your company suffered from force majeure – that is, if you have been prevented from delivering goods or services.
- The first thing you have to do is study whether there is force majeure clause in the contract that you can invoke, study it carefully with the help of a lawyer or a lawyer.
- You need to look in the agreement what formal requirements are required to rely on the force majeure clause.
- Notify the other party in writing why you are invoking the force majeure clause. This, in turn, can help them
- Examine whether the circumstances surrounding the agreement prevent you from fulfilling your obligations. If you deliver goods, you may want to look for replacement goods to your customer. Or maybe the customer can find replacement goods – it all depends on the industry if there is force majeure.
- Check your insurance policies. Are you entitled to insurance cover? Some insurance policies give entitlement to compensation in the event of production interruptions due to Covid-19.
- Keep in mind that if you can’t deliver, it doesn’t mean that everything you do, all the services and products, needs to suffer. The Swedish Compensation Act says that you have an obligation to perform as far as you can. It is good to remember in case of any future disputes.
- There may be a time limit on how long you can plead force majeure. Stay within the time frame to avoid problems.
- Determine whether it is advantageous to terminate the contract on grounds of force majeure. Discuss with your trading partners, suppliers and customers, if you can come up with a better way than to invoke force majeure.
- Be sure to notify your counterparty as soon as possible to ensure their knowledge that you are invoking force majeure and keep up to date on what is happening.
As an entrepreneur, you depend on your customers and suppliers. The epidemic of the Corona virus has caused turbulence and the force majeure clause is considered a matter of course to resort to. However, it depends a lot on what industry you are in and how the agreements with your counterparts are written. Force majeure should be seen as the last resort – the best way is to have good communication with your customers and suppliers to find the best possible solution. Force majeure shall be regarded as the last resort.
The legal emergency room’s contract lawyers have very good knowledge of how to handle force majeure in case of breach of contract, both their own breach of contract, and when your company suffers from breach of contract from the supplier. See here and here for more information about The Emergency Room’s offer in contract law.
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