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The COVID-19 pandemic had a significant impact on businesses and individuals alike. Businesses have been forced to close their doors, employees have been laid off, and consumers have been unable to purchase goods and services. In the midst of this chaos, many businesses have turned to force majeure clauses in their contracts in an attempt to avoid liability for their inability to perform.
What is Force Majeure?
A force majeure clause is a provision in a contract that excuses a party from liability for non-performance due to an unforeseen event beyond the party’s control. Under Wisconsin law, a force majeure clause is only effective if it is both reasonable and unambiguous. Generally, a clause is reasonable if it is not unduly harsh or oppressive and it is unambiguous if it is clear and understandable.
In order to determine whether a force majeure clause is effective, courts will consider the following factors:
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The specific language of the clause
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The nature of the contract
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The circumstances surrounding the non-performance
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The parties’ intent
If a court finds that a force majeure clause is effective, the party seeking to rely on the clause will be excused from liability for its non-performance. However, the party may still be liable for damages if it could have reasonably avoided or mitigated the non-performance.
How Does Force Majeure Apply Following the COVID-19 Pandemic?
The COVID-19 pandemic has been declared a force majeure event by many businesses, and has sometimes also been declared so by the courts. This means that businesses that have been unable to perform due to the pandemic may be able to rely on force majeure clauses in their contracts to avoid liability. However, it is important to note that force majeure clauses are not always effective. Businesses should carefully review their contracts to determine whether they contain a force majeure clause and whether the clause is likely to be upheld by a court.
In addition, businesses should be aware that even if a force majeure clause is effective, they may still be liable for damages if they could have reasonably avoided or mitigated the non-performance. Businesses should consider taking measures to minimize the impact of the pandemic on their operations and to document their efforts to do so.
The COVID-19 pandemic has created unprecedented challenges for businesses. Force majeure clauses can provide some relief to businesses that have been unable to perform due to the pandemic. However, businesses should carefully review their contracts and consult with an attorney to determine whether a force majeure clause is likely to be effective in their particular situation.
If you have questions or would like legal assistance, feel free to contact the legal professionals at West & Dunn. You can contact us by phone at 608-490-9449 or through our Contact Us page for a free consultation regarding your case.