Mason Hayes & Curran: Pandemics now more likely to appear in standard force majeure clauses

Edel Hartog
Edel Hartog

In-house lawyers are more likely to include pandemics in their standard force majeure clauses following the COVID-19 crisis, a survey conducted by business law firm Mason Hayes & Curran LLP has found.

The survey of nearly 80 in-house lawyers from both the public and private sector shows that the typical contractual approach taken by lawyers is being re-examined, and there is a shift in what might be considered typical or “on-market” positions.

Most suppliers (57 per cent) and customers (52 per cent) do not currently specify a pandemic or epidemic or similar disease event as a relief item in their standard force majeure clauses.

Of these respondents, more than a third of suppliers (37 per cent) and most customers (56 per cent) plan to include pandemics, epidemics or similar circumstances as a relief item in the future.

Edel Hartog, commercial contracts partner with Mason Hayes & Curran, said: “Since the pandemic, force majeure clauses have moved from being standard boilerplate to something that lawyers are examining forensically.

“Suppliers are focussed on whether they can seek relief, and customers are looking at whether they have to give relief to suppliers. What we are seeing with our clients, which is borne out by the survey results, is that there is a shift to more analysis on force majeure clauses to see if they fit for purpose and a move towards tailoring them for each individual contract – not just for COVID but for possible future events like it.”

Since the COVID-19 restrictions were imposed, the issue of contractual relief has been significant. Of the suppliers surveyed, nine per cent successfully sought relief under a force majeure clause in light of COVID-19 restrictions but the vast majority (78 per cent) didn’t consider seeking relief.

On the customer side, 25 per cent didn’t grant relief when approached by a supplier, but 40 per cent did grant some form of relief.

“The difficulty for both suppliers and customers is that there is no settled Irish legal meaning for the term force majeure, and the ability to rely on a force majeure clause will turn on the precise language of the clause and demonstration that non-performance is due to force majeure,” Ms Hartog said.

“We will continue to see more frequent examination and negotiation of these clauses well into the future.”

The survey also found that most customer respondents see Brexit as a relevant consideration for their organisation in their contracting arrangements.

Ms Hartog said: “In the survey, 22 per cent of suppliers and 55 per cent of customers insist on Irish law and jurisdiction when faced in negotiations with a contract governed by English law.

“If you have international contracting counterparties, we can expect to see this trend continuing as organisations move away from UK law. The key is to continue to be vigilant to future-proof contracts for Brexit, especially in areas such as data protection, regulatory compliance, currency fluctuations and potential delivery delays arising from additional custom checks once the UK no longer adheres to EU laws.”

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