Hi Matthew, Have you looked at the IACCM Contract Design Pattern Library: contract-design.iaccm.com/?
Have you looked at the examples and guidance provided in the Contract Design Library on this website (look under the Resources tab). This offers examples, ideas and guidance. IACCM works with a growing number of member companies on simplification and design projects so we also have specialists on our team who can offer further advice or examples you can use.
Hello, we are being asked similar questions by a number of members. All FM clauses in new contracts should include a reference to the ongoing pandemic. As you point out there is a risk still that there will be continued fallout from this both on the buy and sell sides. We are advising members to be as prescriptive as possible in thinking about and addressing in their FM clause any future risks that could put the services or goods to be delivered at risk. Think beyond the usual FM remedies of suspension or termination. You may need alterntive remedies which could include a reduction in scope of what is being deliverd together with any associated pricing. You may also wish to consider a phased approach to ramping up obligations after a reduction period due to ongoing uncertainty. It is difficult to cater for all future uncertainties. Thus, we advise that you also build into the contract further agility to cater for complete unknowns that still might arise. IACCM has developed a framework called the VCU to help our members to map out uncertainty within their contracts and ensure that appropriate terms and conditions are used for each contractual relationship. Please contact us if your organisation is interested in participating one of our workshops around this.
I think also important to make the point that when an event is known and on-going, in itself it cannot really be a Force Majeure event! So I'm not sure that either party could invoke coronavirus in a contract being agreed now.
What do you think, Paula?
• TRG Law Limited
At least under English law, what qualifies as FM depends only upon the wording of the relevant contract clause. Just because a situation such as Covid is known at the time of contracting does not I believe, of itself, prevent a party relying on an appropriate clause providing you can bring yourself within the wording. Of course, if the relevant clause limits FM to matters 'not reasonably foreseeable' then that would be another matter but many clauses do not do so.
Thanks so much for your message and yes we are gathering lots of "good news" stories and as you say, examples of how organisations are demonstrating their agility and adaptability in times like this. Thank you for sharing the story of Meex - I will personally look this up and add it to the output that we are generating. We are indeed focusing on how IACCM supports small businesses more and more and I like your idea about a blueprint for agility. Thank you again and please do keep your ideas coming - they are much appreciated! Sally
Hi - at my workplace we are mainly dealing with FX related claims that are being submitted as force majeure. In these cases, they are (b) - in that did the party have an opportunity prior to the FM event occurring to reasonably speaking, manage and treat the risk.
! disclaimer - I don't know anything about Australian law !
but I don't see how option a) can be reasonable.
Risks can appear as time goes by due to changing circumstances and something that is not reasonably foreseeable at one point in time could well be later on.
My apologies for the delayed reply to your question.
In general, the clause is referring to an issue that you could reasonably have anticipated and therefore could have prepared for it in some way. That means not only before inception of the contract, but also during its performance.
Even in a case where Force Majeure applies, there is a duty to take reasonable measures to mitigate its effects.
In the case of the pandemic, there are many debates over whether and in what circumstances it represents a Force Majeure event. However, even when disallowed, there may be grounds for claiming frustration of contract or impossibility of performance due to related events.
We have also launched a survey today which has already generated hundreds of responses and we will be putting out a report on the results early next week so please watch out for that.
I hope this helps and please do let us know if you have further specific questions.
• Cadent Gas Ltd
There are multiple ways to be honest, including Force Majeure clauses and Business Continuity obligations on the supplier which are regularly tested.
• Vaisala Inc.
We have recently added a statement to all quotes to customers with regard to COVID19, namely that it is now a 'known' event and given that the environment is ever-changing that status of your order may change, including for example the time from submission of order to delivery/performance. We will use all commercially reasonable efforts to notify you as soon as possible of any change. So perhaps something along those lines? Our sales and executive teams seem pleased that we are addressing it directly.
Hi Semih - great question, especially as I think that we're yet to see the full impact on many supply chains of this incident.
There will be many suppliers and their customers having discussions about the potential application of this clause. One of the most simple definitions from the internet is set out below :
Unforeseeable circumstances that prevent someone from fulfilling a contract.
It's instances like this where I go back to what was a watershed moment for myself and many others in the audience when Bruce Everett and Tim Cummins challenged the audience in New Zealand last year, asking why we spend so much time trying to get the best supplier on board to give us the best possible outcome - and then run straight to solicitors when something goes wrong. Perhaps now is that opportunity, if you haven't already adopted the IACCM contracting principles into documents, and think about how you might engage directly with suppliers and customers and hope that they remember back to when everyone was happy that both felt excited to be part of a new relationship - and how to maintain that through what might be a challenging time around the globe.
If you've got a strong relationship with some of your affected suppliers, no doubt you've had a chat already about this.
If not, then perhaps you could kick that off by extending out to them the olive branch to start these discussions.
Thanks for your post. I forwarded it to Tim Cummins, our Founder and President and he wrote this blog for you and others who are interested in the impact of the virus