In a matter of just one week, everyone went from a do-not-panic state to a state of complete lockdown. Coronavirus is spreading like wildfire and each day we see several cases rising at an alarming speed.
While people are locked inside their houses for safety concerns, the markets have witnessed record falls and businesses are on a downward spiral. Furthermore, country-wide quarantines, travel restrictions, and social-distancing measures must result in a pointy fall in consumer and business spending producing a recession. So during such testing times, there are several financial and legal aspects that each business should bear in mind to mitigate risks and block on their losses.
Companies are worried about the results of the non-fulfillment of their contractual obligations. A provision that protects companies from such defaults is – force majeure clause – which defines events that excuse the non-performance of a celebration. A contract may either explicitly list all qualifying events, or generally define a force major event as “an event beyond the parties’ control”, leaving room for interpretation. Thus, companies must seek samples of relevant language like “disease,” “epidemic,” “pandemic,” “quarantine,” or “acts of state,” which can be interpreted to incorporate the COVID-19 outbreak and excuse its non-performance.