Having Trouble Meeting Your Business Contract Obligations?
Apr 1, 2020 | Written by: | Share
The coronavirus pandemic has resulted in uncertain times for many businesses. The rapid escalation of governmental orders from social distancing to self‑isolation have left companies reeling. How will you comply with your vendor contracts? Can you demand that your suppliers continue to operate? Does your contract have a force majeure clause?
A force majeure clause is often overlooked but can be a business-saving clause during a pandemic. This clause allows for the cancellation or delay of a contract due to business interruptions that are beyond the control of both or one party to a contract. Typical examples are tornadoes, flooding or hurricanes that make delivery of goods impossible. Less typical examples, although very current, include orders of state and federal government to shelter in place or close your business unless you provide an “essential service.”
Your first step should be to review your ongoing contracts. Is there a specific force majeure clause or will you be relying on the common law? A specific force majeure clause will often identify the exact cause of the impossibility or impracticality of performance. Did a hurricane make the delivery of goods to your customer impossible? Did the services or goods being sold require more than 10 people be in a room together? But more importantly, did the written clause provide these as excusable causes for delay/cancellation? If your contract provides for the specific cause, you may be able to rely on this clause when not performing. If your contract does not provide for the specific cause, you may still be able to rely on the common law standards of impossible or impracticable. In cases where the contract doesn’t provide for an excuse in performance but performing would be unlawful, a court will look to the cause of the impossibility to perform in determining whether your failure to perform is a breach of contract or if it is an excusable delay.
If you are unable to perform or your vendors are unable to provide goods to you, contact the attorneys at Gebhardt & Kiefer, P.C. to review your contracts and determine your rights and obligations.
Daniel Makoski, Esq., is an associate with Gebhardt & Kiefer, PC, and practices primarily in the areas of tax planning, tax controversy, transactional business matters, wills, trusts, and estate planning. He was named to the NJ Super Lawyers Rising Stars list in the practice of Estate Planning & Probate in 2015, 2016 and 2017. Contact Mr. Makoski for a consultation at 908-735-5161 or via email.