Amend Law

The COVID-19 pandemic brought unforeseen disruptions to businesses worldwide, forcing many to confront legal challenges buried in their contracts. Force majeure clauses, traditionally relegated to boilerplate language, became a critical focal point for risk management. These clauses, which excuse contract performance due to extraordinary events, were tested in unpredictable and complex ways.

Midwest businesses, known for their resilience and practicality, have adapted their use of force majeure clauses in the post-COVID era. From revising their terms to addressing new risks, businesses in the region are taking proactive steps to manage the unexpected. Here’s a look at how they’re evolving these clauses and the lessons they’ve learned along the way.

Lessons Learned from COVID-19

Before the pandemic, force majeure clauses were seldom viewed as operational necessities. Many contracts included vague language or merely listed broad categories like “natural disasters” or “acts of God.” When COVID-19 struck, businesses realized they needed more precise and tailored language to address events like pandemics and government-imposed shutdowns.

These experiences taught businesses the importance of drafting clauses that explicitly account for the range of disruptions modern enterprises face.

Updates to Force Majeure Clauses

Today, Midwest businesses are implementing several key updates to their force majeure provisions to prevent the challenges of the past from repeating.

Explicit Definition of Covered Events

Businesses are now specifying exactly what constitutes a force majeure event. While traditional clauses included broad language like “natural disasters,” updated clauses now include pandemics, epidemics, public health emergencies, and government-mandated closures.

Mitigation Obligations

Many updated force majeure clauses include language requiring both parties to mitigate the impact of qualifying disruptions. Businesses are expected to explore alternative solutions, such as sourcing from other suppliers or implementing virtual work where possible, before invoking force majeure. This shift ensures commercial relationships can remain as intact as possible during tough times.

Timeframe and Notice Requirements

Business leaders across the Midwest are tightening notice requirements within their contracts. Writing in clear timeframes for when force majeure declarations can be made helps businesses respond faster. An Indianapolis logistics company, for example, clarified its notice period to require written communication within five days of an event occurring, leaving less room for delays.

Exclusions

Some contracts now specify exceptions to force majeure. For example, events deemed foreseeable at the time of the agreement, such as seasonal labor constraints, are excluded. This ensures the clause doesn’t become a catch-all for lesser inconveniences.

How to Draft Effective Force Majeure Clauses?

Midwest businesses looking to strengthen their force majeure clauses can benefit from these best practices:

• Tailor the Clause to Your Industry: A Chicago-based software company may include cybersecurity risks like system outages or breaches, while a Nebraska farming co-op might prioritize natural disasters and equipment shortages. Focus on what’s relevant.
• Consult Legal Experts: Don’t rely on generic contract templates. Work with attorneys experienced in your sector to craft precise language.
• Review Contracts Annually: The pandemic taught businesses that the unexpected is always around the corner. Regularly revisiting agreements ensures they stay relevant to emerging risks.
• Strike a Balance: Ensure the clause protects your business without alienating partners. Clear, fair terms preserve working relationships during disruptions.

Conclusion

Force majeure clauses are no longer footnotes for Midwest businesses; they are now essential tools for managing uncertainty and protecting operations. By learning from the disruptions of COVID-19 and adapting their clauses to include new risks, businesses are better equipped to handle future challenges.