3 steps to effectively handling the clause du jour
COVID-19 and Force Majeure - The Perfect Storm
Regardless of where one believes COVID-19 originated from, contract professionals probably agree that it falls into the category of “Act of God” resulting in force majeure’s new found popularity. Although COVID-19 has actioned the most common force majeure provisions in contracts, many legal and contracting professionals across industries are finding themselves scrambling to determine applicability and the ultimate impact.
To help organizations get their arms around the where, what, and how of force majeure, the following three steps should be considered:
1. Discovery: Identify clauses and associated risk
You can’t determine the approach if you don’t know what you have and where to find it. This essential first step focuses on the identification of all applicable provisions across a company’s contract repository. Fundamental to the process is the use of AI technology to quickly and thoroughly extract force majeure references, termination, notice, and other key provisions. Having a complete view will determine next steps and the ultimate success of the entire initiative.
2. Prioritization & Solutioning: Understanding next steps based on risk and other factors
Now that you know what you have, you can determine an optimal risk mitigating approach. Analysis includes gaining an understanding of the specific provisions to determine applicability of force majeure, whether notices must be given to counterparties, if parties are able to terminate the contract, and the manner in which termination must occur. Through this exercise, organizations can make informed decisions about what steps should or should not be taken and to establish a well-conceived plan.
3. Delivery: Execute and track against plan
With the underlying provisions identified, analysis complete, and a solid plan in place, all that is left to do is act. Associated activities will vary and be based on what was identified and learned during step 2. Action may include outreach to counterparties, written legal notices, tracking of responses, and negotiating amendments.
To meet demanding timelines and to ease the burden of the workload, many organizations leverage a combination of technology and the expertise of 3rd party contract professionals to execute and provide support across all three phases of the project.