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Business Interruption and Commercial Contracts

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Considerations for the COVID-19 Pandemic

The COVID-19 pandemic is disrupting virtually every business’s ability to meet its contractual obligations.  Perhaps state or local shelter-in-place orders are preventing your supplier from delivering the critical materials you need, or the orders are preventing your product from reaching your customers. Whatever the situation, it is important to understand your options and develop a strategy to protect your business.

Many commercial contracts contain provisions, such as force majeure clauses, that attempt to allocate risk of the unknown.  Statutory “gap filling” provisions may also apply.  Finally, case law may inform how risk should be allocated among contracting parties and what steps you should take to preserve your rights.  To help sort through these complicated issues, Crowell & Moring has launched a client alert series on the practical ins and outs of force majeure and related legal concepts, beginning with this recent client alert.  We also prepared a commercial contracts checklist to help you triage the issues.  These tools are just the start.  We also leverage our experience counseling clients on business issues arising out of the coronavirus pandemic to help you think through the issues in real-time and develop strategies for protecting your business. 

Our COVID-19 Business Interruption and Commercial Contracts Team

Our cross-disciplinary COVID-19 response team brings together litigation, regulatory, and transaction attorneys to counsel you on contractual and related issues, mitigate risk, and develop strategies to advance your business. Our team includes seasoned trial lawyers to help advance or defend your position in court or arbitration on issues such as force majeure, impossibility, commercial impracticability, risk allocation, and the like.

Recent COVID-related contracts counseling matters include:

  • Advising an automotive parts supplier on whether to continue accepting orders in a force majeure situation. 
  • Assisting an international nonprofit organization in its risk analysis on whether to proceed with or cancel a major upcoming international event, including advice on possible liability vis-à-vis the event organizer, suppliers such as the event venue, and registrants.
  • Advising a nationwide retail chain on its lease agreements and obligation to continue paying rent during the COVID-19 crisis. 
  • Advising a global chemical company on breach of contract and force majeure issues.
  • Advising a professional sports team on a variety of coronavirus issues, including a ticket suspension policy and breach of contract and tort issues.

Recent business interruption-related matters include:

  • Prevailing 3-0 in a two-week arbitration and achieving a favorable settlement for a transportation client whose utility customer asserted force majeure as grounds for non-payment under a long-term shipping contract valued in excess of $1 billion. 
  • Representing a global commodity supply company in multiple arbitrations and litigation involving claims of force majeure related to our client’s temporary inability to perform under long-term supply contracts. 
  • Conducting a full-scale due diligence review of a company’s line of supply contracts to assess their vulnerability to a force majeure or other contract disruption claim.
  • Advising multiple multinational clients across industry sectors on product shortfall episodes and whether, when, and how to declare force majeure.
  • Representing a rail entity in arbitration with a state entity owner of a power plant asserting new environmental regulations as force majeure.  After the arbitration panel denied our opponent’s summary judgment motion, our client settled on favorable terms.
  • Arbitrating and litigating  parallel matters over long-term IP licensing agreement and impossibility defense.
  • Arbitrating $10 million force majeure claim by a coal company against utility.
  • Representing an intermodal transportation company in an arbitration of a logistics company’s breach of contract claims on force majeure grounds due to 2008-2009 recession.  Client secured a favorable settlement before the arbitration hearing.
  • Representing the University of California in a lawsuit alleging that a third party’s business was destroyed as a result of the University’s data access control protocols.