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Posts Tagged ‘Force majeure’

3 tips on how to ‘hurricane-proof’ your business!

Monday, October 28th, 2013

As you batten down the hatches in preparation for St Jude’s Storm, have you remembered to check your business terms? What if the storm cuts all power and you can’t open your shop or provide your website? What if you are OK but your sub-contractors are affected? Here are 3 key areas to check:

  1. Check your insurance policy: what damage is covered by your policy? Does it include storm or flood damage? Does it extend to just your home or do you also have an extension for your business or indeed a seperate policy specifically for your business. What are you entitled to if your business is interrupted? Have your camera ready so you can take pictures to back up any claims.
  2. Check your Terms of Business: I am assuming you have some! If not please get in touch quickly…If you can’t deliver your products or service, check what the procedure is for alerting your customers. Towards the end of your terms, you should hopefully have a so-called “Force Majeure” clause. This sets out that in the event of something happening which is beyond your control such as storms, flooding, acts of war, both parties are temporarily relieved from their obligations under the contract. Usually you will have to alert the other side- a bit like playing your joker card- and a timetable is kicked off whilst the unexpected circumstances continue. If it carries on too long, either party can elect to end the contract with no penalty. Check what period you have stated in your terms- it is usually 30 days.If you do not have a force majeure clause, then you need to see what commitments you have made to your customers and what the process is for deviating from the commitment. You may have built in a buffer zone and still be within it. At the very least you will have to let your customers know that you can’t deliver or will be late…. Customers would much rather know than be left in the dark!
  3. Check your supplier’s terms: If you are on the receiving end and are expecting deliveries or have sub-contracted some services out, what if they can’t deliver to you or to your customers? Do their terms include a force majeure clause or can they be held to account?

So the bottom line is to grab your contracts now and study them quickly. If you don’t have time or don’t know where to look, we are happy to help and- touch wood- still open for business!

Photo courtesy of the Telegraph

Photo courtesy of the Telegraph

Can hurricanes feature in contracts?

Tuesday, October 30th, 2012

Yes they can! Odd as that may seem, typically towards the end of a contract you will find the so-called ‘boiler plate’ clauses. Most peoples’ eyes are glazing over by this point and don’t pay much attention to them. However, they contain some really useful rights and clarifications. One such clause is the ‘Force Majeure‘ clause. In a nutshell, it states that should an event beyond the control of the parties occur such as a flood, lightning strike, hurricane, terrorist act etc then the parties will be given more time to perform their obligations. If the event carries on beyond an agreed period-typically 30 to 60 days- the parties can also agree to end the contract without penalty.

Hurricane Sandy

Force Majeure strikes! Photo courtesy of 6abc Action News

BE CAREFUL though: some parties try to sneak in events which arguably are within their control such as stock shortages or their staff going on strike. Some would say that stock shortage is just down to bad planning and that staff strikes are equally as a result of the employer’s bad behaviour and totally within the business’s control.

So make sure you read your contract to the end! You may find some interesting little twists…

How the sun stole my thunder!

Tuesday, October 4th, 2011

It is not often that good weather puts a spanner in the works! This weekend however it did. Humf. I had decided at short notice to take a stand at a big exhibition over 150 miles away which promised to have a big audience of entrepreneurs. Thousands possibly. Perfect. I worked away into the night getting my leaflets ready, all of the paraphernalia for the stand, hotel rooms for the night before, booked staff to help on the day, the works.Good weather and force majeure

Then came the dreaded weather forecast compounded by headline news in all the papers: “Heat wave this weekend!” and “Head for the beaches!” As soon as I saw them I knew we were doomed. Sure enough, people did head for the beaches rather than come to the exhibition and I don’t blame them. Sniff.

Putting my legal (sun!) hat on, it did lead me to think about the interesting topic of ‘force majeure’ –this is when someone can get out of their obligations under a contract because of something that is beyond their control. Examples of this would be the ash cloud which stopped all flights and interrupted business; another would be if a bolt of lightening hits your factory and you are unable to deliver. Usually we lawyers like to include as many examples as possible in the ‘force majeure’ clause just to be on the safe side. These are usually quite negative events like storms, terrorist attacks, strikes, lock-outs etc. However, I have never seen ‘exceptionally good weather’ included! Technically I was promised a crowd, but the crowd never showed up… maybe organisers of exhibitions and major events should cover themselves for rain or shine?

I would be interested to know of any other events you have come across beyond your control, especially good ones!

The Volcanic ash cloud-an example of ‘force majeure’

Friday, April 16th, 2010

Many terms & conditions have a so-called ‘Force Majeure’ clause which most people ignore-usually because it features towards the end of the contract by which time they are seeing double and have lost the will to live!Added to that, we lawyers are reknowned for using bizarre latin phrases and ‘force majeure’ is probably one of them.Well, it isn’t. It is actually French and is often translated into ‘Act of God’. So what does this little clause do? It is rather like the ‘get out of jail free’ card in Monopoly and relieves a party to a contract from its obligations when certain events beyond its control happen. Say you sell exclusive chocolates with cocoa beans imported from South America. You sign up a massive deal with Harrods to supply them with chocolate santas. A storm hits the plantation and you are unable to supply the chocolate santas. Harrods get angry and want to sue you for the lost business, bad customer experience due to empty shelves..This is where you wave the ‘force majeure’clause at them and heave a big sigh of relief!

What is interesting is they type of event people try to lump into the ‘Act of God’ category. Would you accept strikes as a reason for someone to pull out of a contract?What about failing to back up one’s IT systems and they suddenly crash with total loss of data.You could argue that any prudent business would cater for just such an eventuality and that should not relieve the business from its obligations to you.

And now, what about this volcanic dust cloud.Thousands of flights grounded entailing, no doubt,interruption of supplies and personnel.It will be interesting to see if there will be a spate of claims for breach of contract and whether businesses have that all important little clause…

You might want to check your small print too 😉