As our country continues to grapple with the coronavirus outbreak, businesses are being told to close their doors and send employees home. These closures could be detrimental to so many local businesses in our state. We spoke with Laurence Donahue of Law 4 Small Business via Skype about the “Acts of God” consideration, what it means, and how it could provide an immense amount of relief to so many local businesses.
As a result of today’s COVID environment, many business owners are struggling to earn enough revenue to be able to meet their contractual obligations to their vendors, landlords and banks, let alone make payroll. With financial disaster looming for so many businesses, do standard contracts, loan documents or leases consider “Acts of God” as a way to push pause on a business owner’s obligation to preform until such time that the world returns to normal? The simple answer is, “maybe”. It depends on whether your contract has a Force Majeure clause.
What is a Force Majeure clause?
Force majeure is French for superior force. In contract law, it is a concept that exempts the contracting parties from fulfilling their contractual obligations due to unforeseeable circumstances beyond their control. Force majeure will often apply to what are commonly known as “acts of God” but it can also apply to unforeseeable acts of man, such as theft, vandalism, acts of war or terrorism.
A force majeure clause should always be tailored to your specific circumstances and contingencies that are possible with your business. Keep in mind that a force majeure clause only protects you in the event of reasonably unforeseeable events.
Law 4 Small Business is a law firm for small businesses. They are all about helping small businesses navigate and avoid difficult problems. Their focus is also on helping new entrepreneurs get new businesses in remaining safe and protected as they grow. They work through the hard stuff in small business so you can get back to doing business you love.