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Practical Guidance

Rejection of Pandemic Force Majeure Declaration (Annotated)

Editor's Note: In the following sample letter, the supplier rejects the customer's declaration that a force majeure event
prevents its performance under the agreement. The force majeure clause in question refers speci!cally to a pandemic and
related disease outbreaks.

  

Rejection of Force Majeure Declaration

[Date]

[Counterparty]

[Counterparty Address]
[Contact Person]

Re: Declaration of Force Majeure - Supply Agreement dated [Date]

Dear [Contact Person]:

We are in receipt of your noti!cation dated [Date] in which you assert that an event in the nature of force majeure has
occurred and is preventing performance of your obligation to purchase [Product] under the above Supply Agreement.
You claim that [o"oading facilities for [Product] in [Location] have been signi!cantly curtailed] as a result of [labor
shortages and governmental action to contain the spread of the novel coronavirus (Covid-19) pandemic in
[Country/Location]], and that such a condition is a “cause outside the control of a party” which excuses performance.

Comment: A party receiving a force majeure notice should always acknowledge receipt, even if it is apparent that a force
majeure event has occurred and regardless of whether the recipient agrees or disagrees with the declaration. A close review of
the contract's force majeure language needs to be performed prior to responding. Keeping lines of communication open while
the e#ects of the event are ongoing provides the non-a#ected party with opportunities to monitor the a#ected party and its
e#orts to mitigate or remedy the cause and resume performance.

We note that the “force majeure” provision of the Supply Agreement, section [xx], sets forth a list of events or
occurrences that the parties have agreed constitute an event of force majeure. Included in this list are “epidemics,
pandemics, infectious diseases . . . quarantines . . . government rule or order. . .” Assuming that the current Covid-19
pandemic and governmental orders to restrict business activities at [Location] qualify as force majeure events under the
Agreement, section [xx] also requires that the designated event prevent the party from performing.

While we may agree that, under the Agreement, a force majeure event has occurred, we disagree with you that your
performance is being prevented or made impossible. [The Agreement states that delivery and passage of title take place
FOB designated port of export. No condition exists at [Export port] a#ecting your ability to accept Product at that
delivery point. Moreover, the Supply Agreement contains no requirement that Product be capable of o"oading at any
particular location. Consequently, we maintain that your performance has not been prevented since alternate ports for
o"oading are or may be available. You have not indicated that you have conducted a search for other available
o"oading alternatives or that such a search would be burdensome and fruitless.]

Comment: The party invoking force majeure typically has the burden of proving that the force majeure provision of the parties’
contract properly applies to the claimed situation (see Point of Law (POL)), and is the cause of the party's nonperformance.
Court Opinions Search. Most courts construe the terms of a force majeure clause narrowly to determine whether the risks the
parties have agreed are outside their control and will excuse performance. In the case of the coronavirus pandemic, it is not
enough that the disease has occurred and has a#ected commerce. The party invoking the bene!t of the force majeure
provision has the burden of showing the causal relationship between the outbreak of the disease and its (non)performance
under the agreement. The recipient party is well within its rights to request further information and/or to challenge the force
majeure declaration if it believes the facts do not support the causal relationship.

For the above reasons, we reject your declaration that the force majeure provisions of the Agreement excuse your
performance. We expect that deliveries of [Product] will resume immediately [and insert other contractual performance
expectations] and await your con!rmation to this end.

Sincerely,

[SUPPLIER]

©2020 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs,
Inc.

Disclaimer: This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be
addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client
relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction,
jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document
or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions
expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions
and do not make any representation or warranty as to their completeness or accuracy.

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