Contract Cancellation and Force Majeure – Know your Rights and Consider the Consequences

As the world copes with COVID-19 and the necessity of social distancing, individuals and businesses must contemplate the legal ramifications of their contracts, and what happens when those contracts cannot or are not being performed.   Most contracts contain termination and remedies provisions that may be implicated given the current health crisis.  Additionally, many contracts include “Force Majeure” clauses, which are contractual provisions allocating risk when performance becomes impossible or impracticable as a result of an event that the parties could not have anticipated, such as acts of nature, riots, strikes, wars – or in this instance, a global pandemic.  Force Majeure clauses are often overlooked as “boiler plate” language, but the current climate demonstrates the importance of careful drafting and consideration of the circumstances which might permit a contract to be cancelled. 
 
It is not hyperbole to say that thoughtful evaluation of these issues might determine whether a business survives.  It is essential to understand your contractual rights in order to guard against unnecessary business loss, whether that means continued performance and enforcement of an agreement, or taking the appropriate steps to terminate.  Duggan Bertsch’s litigation team can assist in resolving contractual claims tied to canceled contracts, whether you need to pursue such claims against a contractual partner, or defend against claims wrongfully asserted.  Duggan Bertsch is also well-situated to help its clients assess these issues proactively to avoid disputes and litigation. 
 
Critical questions to consider include:

  1. Is it in your best interest that the contract continue?
  2. Does the contract provide for termination at-will, and if so are there notice requirements?
  3. Does the contract contain a force majeure clause?
  4. Has the force majeure clause been triggered by COVID-19 and the resultant governmental response?
  5. What are the potential damages in the event the contract is terminated wrongfully?
  6. Do any laws or regulations prohibit contract termination? 
  7. Are there alternative means to resolve the potential contract dispute?

We encourage our clients in all industries to consider these questions as the economic ramifications of COVID-19 continue to be felt by all.  If you would like to discuss these matters at greater length, please contact either Timothy Epstein tepstein@dugganbertsch.com or Brian Konkel bkonkel@dugganbertsch.com, also available at (312) 263-8600. 

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