Australia: You know all about force majeure now. But what does commercial contracting actually look like in the midst of a pandemic?

If you are a supplier or receiver of goods, you're probably pretty familiar with your force majeure rights by now. And as COVID-19 brings us a totally new "business-as-usual", it's time to start thinking practically about long term damage control.

If you're a little late to the party (don't worry, everyone is in active wear and standing four sqm apart, it's super boring): COVID-19, and/or the ensuing government orders that have disrupted supply chains and reshaped our workplaces, are in most cases force majeure (FM) events.

These are unforeseen events, outside your control that affect your ability to perform your contractual obligations. You hopefully have a FM clause to help you out when you, or your suppliers, need to amend deadlines or otherwise terminate a contract. The scope of a FM event, what relief that clause may give you, and any procedural requirements for notifying the other party, will depend on the specific terms of your contract.

Also know that as COVID-19 evolves over the next few months, your ability to rely on FM clauses will change – and therefore so should the way you approach commercial contracting.

Most FM clauses have limited applicability periods, so you only have a short time to find a workaround before the contract can be terminated.

If you are a supplier calling a FM event, you will most likely be required to actively attempt to predict and mitigate the effects of COVID-19 on your business, and identify new ways of performing on your contractual obligations. This will mean having evidence of how COVID19 is affecting your ability to perform, and communicating this to your contracting counterparties along with your specific plans as to how you intend to overcome these challenges.

Similarly, if you are depending on the receipt of goods from a supplier, waiting out a FM period and then terminating all your contracts does not make for a sustainable business model. Where you expect a supplier may be delayed, it is commercially imperative for you to reach out early, ascertain their position and clearly communicate your expectations of performance.

Going forward with new contracts, understand that because we're already in the midst of the pandemic, a standard draft FM clause probably won't protect you. We suggest contemplating in advance the disruptions COVID-19 could cause to your contract, and drafting in the appropriate protections and processes accordingly.

We do not disclaim anything about this article. We're quite proud of it really.