Maybe a bit different than the usual fare on TPV, but PG hadn’t thought about the impact of Force Majeure clauses may have on a variety of different industries, including the book business.
For the record, PG doesn’t ever remember seeing a Force Majeure clause in an agreement between an author and a publisher.
I remember learning about Force Majeure in law school as a 1L. It seemed like such a fringe topic that I instinctively pushed it to the back of my mind as a contract provision that must be rarely triggered in real life and therefore would likely not be tested. A Force Majeure clause is a contract provision that absolves both parties from performing under the contract because an event that is beyond either of their control (e.g. a natural disaster or a terrorist attack) has occurred and made performance under the contract “inadvisable, commercially impracticable, illegal, or impossible.” It is generally true that outside of a natural disaster like a hurricane, tornado, tsunami, earthquake, forest fire, or other natural disaster Force Majeure is rarely talked about.
Now, Force Majeure is front and center as a significant portion of America’s businesses are anxiously wondering if a number of crucial contracts that they entered into can be voided as a result of the Coronavirus. There is no telling exactly how much money could be lost by American businesses because of Force Majeure claims, but it can safely be assumed that the potential exposure figure is well into the billions, and it will certainly be the subject of litigation proceedings for a significant time to come.
To make matters worse, not all Force Majeure claims are triggered by the same events and some events that seem sufficiently out of a party’s control, like insolvency, may not trigger Force Majeure. For example, in the state of New York, if performance under the contract is only impossible because it would push an entity to bankruptcy performance will still not be excused under Force Majeure (via 407 E. 61st Garage, Inc. v. Savoy Fifth Ave. Corp.). Although it is helpful to look to the courts for guidance regarding what event may warrant a Force Majeure claim, it is often not as helpful as looking to the specific language of the contract and discovering whether or not your contract even contains a Force Majeure clause and if there are any qualifying events already enumerated by it.
Finding out if you have one of these clauses and, if you do have one, what exactly is outlined in it is certainly not easy since companies may have hundreds or thousands of contracts that they are actively a party to. For a significant portion of companies, manually reviewing (even with the help of Ctrl+F) all of their contracts to determine their potential Force Majeure exposure is a nearly impossible task that would take days.
In response to the Coronavirus crisis, AI is now being used in legal departments to search through all the contracts that they are a party to for Force Majeure clauses and then pulls the exact language of the clause.
Link to the rest at Law.com
If you’re interested in what a Force Majeure clause looks like, here’s an example:
Neither party shall be liable for any costs or damages due to delay or nonperformance under this Data Access Services Addendum arising out of any cause or event beyond such party’s control, including, without limitation, cessation of services hereunder or any damages resulting therefrom to the other party as a result of work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action, or communication disruption.