Peer to Peer: ILTA's Quarterly Magazine

Issue link: https://epubs.iltanet.org/i/1264976

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Page 18 of 52

19 I L T A N E T . O R G A ll weekend your company has received messages from its customers and suppliers stating that, due to the impact of COVID-19, they will not be able to honor their contracts. First thing Monday morning, the CEO relates this information and says that the customers and suppliers all claimed that their "force majeure clause" meant that they could withhold performance. The CEO asks you, "What is a force majeure clause?" and "Do we have those in every contract?" Your immediate response to the CEO's first question is a version of: "it depends" or "it's not so simple." You know it will take time to determine which of your company's contracts contain force majeure clauses and analyze whether COVID-19 and related actions qualify as a force majeure event. BakerHostetler, a national law firm, QuisLex, a leading legal services provider, and eBrevia, a DFIN Company, which offers an AI-powered contract analytics solution, joined forces to help you better prepare for this moment. Using a scenario driven by the actions taken in response to COVID-19 as an example, and leveraging their unique expertise, they prepared this white paper to: • Provide an overview of the legal considerations regarding force majeure clauses and excuse of contract performance. • Present findings from an AI-powered review of force majeure provisions across a broad set of contracts from the last 20 years, providing examples of the data extracted and insights you can use. Force Majeure Explained A force majeure clause is a contract provision that may excuse one party's failure to perform in the event of certain circumstances. Force majeure clauses are commonly included in commercial contracts to provide the parties flexibility should conditions change between the time the contract was formed and the time of performance such that one party cannot perform its obligations. These clauses do not excuse performance for ill-made assumptions about future events or changes in pricing or economic conditions that make performance difficult or economically disadvantageous. Rather, the trigger is usually an event or circumstance that is unforeseeable and completely outside the control of the party claiming the relief. Force majeure clauses are generally comprised of four elements: 1. definition of what is a force majeure event (typically through exemplary lists); 2. identification of what is excused; 3. conditions to exercising relief; and 4. remedies upon the occurrence of a force majeure event. "The trigger is usually an event or circumstance that is unforeseeable..."

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