Your goods or services are in a war zone - now what?

You have spent months negotiating a tough contract that was executed and is now active. Now, war has broken out and all that effort seems to have gone down the drain. To make matters worse, money has changed hands and goods are to be delivered and/or services are to be rendered.

But the war has broken out and your contract has been affected and one or all of the parties is now in a war zone and the contract has come to a complete halt?

Now what?

Well, common sense should prevail in the first instance. If you are the party that is not in the war zone, you might not understand how a war or even a pre-war conflict, might impact the counterparty.

War can have several immediate effects:

• Internet and phone lines can be intermittent or just down completely
• Logistics can be interrupted
• Goods could be out of reach or completely destroyed
• Key people could be impacted
• Borders could be closed and travel in and out might be impossible or limited
• Banks could not be open

Should all or any of the above-referenced effects have happened, you have got to assume that the Force Majeure clause in your contract will apply (assuming there is a Force Majeure clause in your contract and it is written well and clearly).

Force Majeure Clause and Examples

The Force Majeure clause is a French concept that translates as "superior force". Typically, the Force Majeure clause is in the boilerplate section. But it would be a mistake not to read it and potentially redline it to ensure it covers eventualities because courts typically interpret Force Majeure clauses narrowly.

Here is a sample Force Majeure clause that I got from Afterpattern:

"Section 15.12 Force Majeure. No Party shall be liable or responsible to the other Party, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement (except for any obligations to make previously owed payments to the other Party hereunder) when and to the extent such failure or delay is caused by or results from acts beyond the impacted Party’s (“Impacted Party”) reasonable control, including, without limitation, the following force majeure events (“Force Majeure Event(s)”) that frustrates the purpose of this Agreement: (a) acts of God; (b) flood, fire, earthquake or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order or law; (e) actions, embargoes or blockades in effect on or after the date of this Agreement; (f) action by any governmental authority; (g) national or regional emergency; (h) strikes, labor stoppages or slowdowns or other industrial disturbances; (i) epidemic, pandemic or similar influenza or bacterial infection (which is defined by the United States Center for Disease Control as virulent human influenza or infection that may cause global outbreak, or pandemic, or serious illness); (j) emergency state; (k) shortage of adequate medical supplies and equipment; (l) shortage of power or transportation facilities; and (m) other similar events beyond the reasonable control of the Impacted Party."

This clause is good at outlining what events constitute a force majeure event, but they do not set out the steps a party who has been impacted by force majeure should take in the event a force majeure event takes place.

Here is another clause from Afterpattern which does not say what a force majeure event is, but spells out the steps the parties should take in the event of a force majeure event.

"2. In the event of force majeure, the obligations of both parties under this Agreement will be suspended within the scope of the force majeure and its duration. The term of cooperation may be extended according to the time limit for suspension, but the parties shall reach an agreement and neither party shall be liable for this. The party claiming to be affected by force majeure shall notify the other party no later than 15 days after the occurrence of force majeure and shall minimize the damage caused by force majeure. If force majeure lasts longer than 60 days and the parties fail to reach a resolution to continue to perform this Agreement, either party has the right to terminate this Agreement by giving written notice to the other party."

It may be the case that "Force Majeure" is defined in the definition section of the contract and hopefully, if there is such a definition, it is adequately defined. This Force Majeure clause is good because each party knows what will happen in the event of a force majeure event.

The two clauses show the importance of reading the Force Majeure clause and ensure that it is both adequately defined and sets out a viable protocol that each party has to follow. It also shows that, unless you read and redline the Force Majeure clause - in other words, just gloss over the Force Majeure clause because it's a mere boilerplate, you may be exposing your client to unnecessary uncertainty and confusion should a Force Majeure event happen and impact the contract after execution.

The bottom line is that in an increasingly tumultuous and unpredictable world, as a lawyer and/or negotiator, you have to pay close attention to the Force Majeure clause so that it adequately covers all possible eventualities and sets out the steps the affected party should take to trigger the Force Majeure clause.

Not properly reviewing and drafting a comprehensive Force Majeure clause (or even forgetting to include it at all) can have a devastating impact on your client's business and finances so do not ignore it just because it's a "boilerplate clause." You still have to read it (and all the boilerplates) to ensure it makes sense and protects your client in the event of an Act of God a/k/a unforeseeable event over which neither party has control.

The secondary issue is reminding your client to get adequate insurance to cover the acts of God envisaged by the Force Majeure clause.