Force Majeure Clauses
Business contracts ensure that all parties fulfill their obligations to each other. But what if a catastrophic event—such as a pandemic—prevents a business from fulfilling the contractual duties?
The force majeure clause can release a business from a contract in this type of situation. Generally, a force majeure clause accounts for natural disasters, warfare, and other “acts of God” that prevent businesses from carrying out their normal operations and services.
To qualify as a force majeure event, the event must be:
- Outside of the contractual relationship
While these basic requirements apply to most force majeure clauses, every clause has unique language that may or may not cover COVID-19. For example, a contract’s force majeure clause may specifically name pandemics in a list of qualifying events, or it may exclude pandemics from events that release businesses from liability.
If your contract has a force majeure clause, you may be able to safely change or even suspend certain obligations without technically breaching your contract. Alternatively, you may be able to hold another business accountable for nonperformance if a force majeure clause did not adequately protect them.
To determine whether a contract has a force majeure clause and whether it applies, I urge you to get in touch. Many businesses have already adjusted their operations, falsely believing they are automatically protected from liability. As a result, they may face future litigation. I closely analyze your business contracts and advise you accordingly.
Business Survival Plan
Before adjusting your operations or business strategy, you will need an accurate assessment of your current financial situation. A profit-and-loss statement and cash flow analysis can help you objectively evaluate what it will take to rescue your business.
Once you have thoroughly evaluated the present circumstances, your next step is to create a survival plan. Your plan should outline the steps you will take (e.g. lowered expenses, adjusted strategy, increased sales, etc.) that will return your company to profitability in a designated number of months.
One powerful investment you can make is a qualified advisory board. Small business advisors with knowledge and experience can review your profit-and-loss statement, strengthen your survival plan, and anticipate obstacles.
Adjust Your Strategy to Meet New Demands
The COVID-19 pandemic has drastically changed the market. Businesses must adapt. Retail companies, for example, must have an online market presence where a consumer can purchase products without leaving their home. The internet has become an invaluable space for commerce, connection, and information, and you may consider investing in internet marketing strategies if you haven’t already done so.