As Canadian businesses begin to deal with the fallout of the novel coronavirus, many are evaluating whether their commercial contracts could be broken by force majeure clauses that cover events outside the parties’ control. Preet Gill and Richard Swan comment in this Globe and Mail story.
Determining whether a force majeure provision can be triggered involves a number of factors, including the wording of the clause itself and the timing of the contract. Preet says:
“It becomes a bit difficult because each clause is different,” said Preet Bell, a partner at Bennett Jones LLP in Toronto, who says that a party who wants to rely on a force majeure clause will also have to show that there was no way for them to meet their obligations under the contract. “It can’t be just that it’s more difficult or more expensive, but it has to get close to impossibility.”
Ms. Gill wrote a commentary on the issue with her colleague Richard Swan, who says supply-chain contracts are most at risk.
“If you’ve got hundreds of different parts coming from all over the world that go into the manufacture of a vehicle or a piece of electronics, when there are timing delays and plant shut downs and that supply chain gets interrupted, it can set off a whole chain reaction of events in the manufacture of the product, and that can lead to litigation.”
Determining whether a force majeure provision can be triggered involves a number of factors, including the wording of the clause itself and the timing of the contract. Preet says:
“It becomes a bit difficult because each clause is different,” said Preet Bell, a partner at Bennett Jones LLP in Toronto, who says that a party who wants to rely on a force majeure clause will also have to show that there was no way for them to meet their obligations under the contract. “It can’t be just that it’s more difficult or more expensive, but it has to get close to impossibility.”
Ms. Gill wrote a commentary on the issue with her colleague Richard Swan, who says supply-chain contracts are most at risk.
“If you’ve got hundreds of different parts coming from all over the world that go into the manufacture of a vehicle or a piece of electronics, when there are timing delays and plant shut downs and that supply chain gets interrupted, it can set off a whole chain reaction of events in the manufacture of the product, and that can lead to litigation.”
