You have a lease, you ordered supplies or inventory for your business, you have a loan, your sport club shuts down, an authority orders your restaurant to shut down. Covid-19 has drastically altered your business landscape. Now what?

COVID-19 may constitute a force majeure (FM) depending on your contract wording, the nature of the contractual obligation, and COVID-19’s impact on that obligation.

FM clauses are narrowly construed and courts are more likely to rely on FM clause that includes language that captures an event like COVID-19. Courts may be reluctant to recognize COVID-19 as an FM, where the impacts were avoidable or where the only impact was to make obligations more expensive to perform. The courts have other means of dealing with matters of increased expense.

A party relying on an FM clause should take certain key steps include complying with notice obligations, taking demonstrable steps to mitigate foreseeable or actual impacts of the FM, and demonstrating those steps to the other party. Businesses will likely want to seek notice and evidence from the party relying on FM language to show taken steps to mitigate Covid-19 impacts on performance of contractual obligations.

You should be proactive. Formulate and implement a COVID-19 mitigation and response plan and review your contracts for FM language, potential litigation, and how your upstream and downstream relationships will be affected.