All Boat, No Rudder: Force Majeure Clauses
All Boat, No Rudder: Don't Let Force Majeure Clauses Sink Your Contract!
Force Majeure Clauses are not new in the contract world; however, they have achieved a new meaning during the COVID-19 pandemic. COVID-19 can be deemed to be an event “beyond a party’s reasonable control” and may trigger early termination of a contract without consequence which can be detrimental to employed physicians and providers.
Here is an example of a Force Majeure Clause:
"If either party is prevented from performing its obligations under this Agreement, whether such inability to perform is caused by strikes or other labor disputes, official or unofficial, fire, war, flood, pandemic or any other reason beyond the party’s reasonable control, each party’s rights and obligations hereunder shall cease upon notice of such cessation by either party."
Force Majeure Clauses are starting to specifically reference “pandemic”, “epidemic”, “virus”, “crisis” or “governmental action” in the list of triggering events and would allow a party to stop performing its obligations without consequence due to COVID-19. Even if a Force Majeure Clause does not specifically list any of the events mentioned above, it may have a “catch all” phrase, which would include COVID-19 as a triggering event. Catch all phrases ensure a broad ability to terminate the contract “for any other reason beyond the parties’ reasonable control.”
Parties should consider whether the Force Majeure Clause allows both parties to cease performance under the contract. While physicians must take caution with Force Majeure Clauses, practices should also pay attention to these clauses in their standard template contracts.
The pandemic has raised several concerns and highlighted that Force Majeure Clauses should not be glossed over as boilerplate language in contracts. As such, Force Majeure Clauses should be negotiated and documented appropriately. Of utmost importance is to ensure that early termination protections apply in the event the Force Majeure Clause is triggered. Also, be especially cautious and seek legal advice if you are presented with an Amendment to your current contract that contains a Force Majeure Clause.
As always, we recommend having your contract reviewed by an experienced health care attorney. For further information, please Contact Us.
Articles distributed by Malecki & Brooks Law Group, LLC are advertisements and summaries for general information and discussion purposes only. They are not full analyses of the matters presented, legal, or otherwise, and may not be relied upon as legal advice.
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