We are all thinking about what the next few weeks and months will bring as we look for support from neighbours, friends and business partners alike.
With COVID-19 all businesses are considering how they will fulfil their ongoing contractual obligations. Franchisees have the additional worry about how they will continue to operate in line with their franchise agreements. Every day brings new health advice and procedures, changes in consumer behaviour, possible staff shortages or changes in work patterns, and lastly; supply chain delays.
In this blog we take a quick look at how force majeure clauses may help to mitigate the effects of COVID-19, and help franchisees navigate the next few months. Enacting a force majeure clause might just allow flexibility to deal with the challenges they face, whilst they keep businesses going, people employed, and everyone safe.
Let’s start with looking at what the Force Majeure Clause is
Force majeure is a contractual clause that is invoked when an event outside the reasonable control of either party prevents the performance of contractual obligations. Sometimes referred to as ‘impossibility,’ the clause will be expressly listed in the contract and permits the termination or suspension of obligations that would otherwise constitute a breach.
How does it apply?
It is worth noting that force majeure has no set definition in common law, meaning that its application needs to be judged on a case-by-case basis. Broadly, the following considerations need to be met in order for a force majeure clause to be invoked:
While the COVID-19 pandemic is in its early stages, a force majeure clause is capable of encompassing such an event provided it has made the performance of obligations impossible and not just less convenient or more expensive. A simple example would be if a busy coffee shop franchise in a London Tube Station had purchased its regular amount of coffee beans and then the government advises everyone to work from home. If they can enact the force majeure clause, they may be able to cancel the order as the event happened outside of their control. As it is a complicated area of law, we advise that you seek expert legal help to ascertain if this is the case.
If you are concerned about your obligations, then we suggest:
What if there is no force majeure clause or it doesn’t apply?
Our next post will detail the steps to take if a force majeure clause is not included in a contract, along with another option that may be available – the doctrine of frustration.
You may also be interested in
We regularly blog on subjects related to franchising in the UK, commercial law and employment law.
Goldstein Legal’s founder, Roz Goldstein to retire from Leading Goldstein Legal in September 2023
Goldstein Legal’s founder, Roz Goldstein to retire from Leading Goldstein Legal in September 2023 Goldstein Legal, the legal franchising boutique that operates from Nexa, the consultancy platform, announces that founder...