This document summarizes a webinar about force majeure clauses in the context of COVID-19. It discusses the purpose of force majeure clauses to allocate risk for non-performance due to unforeseen circumstances. It analyzes force majeure clauses in two court cases - Deloitte Consulting v. Grand America, where 9/11 allowed cancellation, and a hotel contract. It also discusses a material adverse effect clause in a Victoria's Secret acquisition agreement excluding pandemic impacts. The presentation emphasizes carefully reading force majeure clauses as there is no hidden meaning - they will be enforced as written, including any time limits.

1. parsonsbehle.com
Force Majeure Clauses in the Wake of COVID-19
J. Thomas Beckett
Parsons Behle & Latimer
Friday, May 1, 2020

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Things are changing rapidly. We are working extremely hard to keep
up with all that is happening. This webinar is based on available
information as of May 1, 2020, but everyone must understand that this
webinar is not a substitute for legal advice. If there are questions about
the information contained in the presentation and how it applies to your
business, then you should contact your legal counsel. This
presentation is not intended and will not serve as a substitute for legal
counsel on these issues. Given the complexity and rapidly changing
landscape, you must consult with your legal counsel on these issues.
Legal Disclaimer

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Structure of Presentation:
1. What’s the purpose of a force majeure clause?
2. Look at three examples of force majeure clauses in the
context of two court cases.
3. Closing thoughts.
4. Q&A.

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What’s the Purpose of Force Majeure Clauses?
Problem: Sometimes a party can’t perform under a contract
because of unanticipated circumstances beyond its control;
for example, because of COVID-19 and its economic shock.
Question: Is the non-performing party liable for damages? In
other words, how did the parties agree to allocate the risk of
loss attributable to disasters out of their control?
Answer: It depends on what the contract says.

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Deloitte Consulting v. Grand America
Deloitte Consulting had booked every room in a 5-star hotel
for two, week-long celebrations of the achievements of its
top employees.
These celebrations were scheduled for late September
2001.
After 9/11, Deloitte cancelled both events.

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Problem: Deloitte cancelled because of 9/11, an
unanticipated event that was out of its control. shock.
Question: Was it liable for damages?
Answer: It depends on what the contract says.

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The Force Majeure Clause in the Deloitte Case:

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The Force Majeure Clause in the Deloitte Case:
A failure of either party to perform its obligations under this
agreement shall not constitute default under this Agreement or give
rise to any claim for damages . . .

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The Force Majeure Clause in the Deloitte Case:
A failure of either party to perform its obligations under this
agreement shall not constitute default under this Agreement or give rise to
any claim for damages . . .
if and to the extent such failure is caused by occurrences (whether
direct or indirect) reasonably beyond the control of the party
affected,

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The Force Majeure Clause in the Deloitte Case:
A failure of either party to perform its obligations under this
agreement shall not constitute default under this Agreement or give rise to
any claim for damages . . .
if and to the extent such failure is caused by occurrences (whether
direct or indirect) reasonably beyond the control of the party affected,
including, but not limited to: acts of God, war, government
regulations, disaster, strikes, civil disorder, curtailment of
transportation facilities, or other emergency,

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The Force Majeure Clause in the Deloitte Case:
A failure of either party to perform its obligations under this
agreement shall not constitute default under this Agreement or give rise to
any claim for damages . . .
if and to the extent such failure is caused by occurrences (whether
direct or indirect) reasonably beyond the control of the party affected,
including, but not limited to: acts of God, war, government
regulations, disaster, strikes, civil disorder, curtailment of transportation
facilities, or other emergency,
that makes the Agreement inadvisable, illegal or if it is impossible
to provide the facility or hold the event.

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The Force Majeure Clause in the Deloitte Case:
A failure of either party to perform its obligations under this
agreement shall not constitute default under this Agreement or give rise to
any claim for damages . . .
if and to the extent such failure is caused by occurrences (whether
direct or indirect) reasonably beyond the control of the party affected,
including, but not limited to: acts of God, war, government
regulations, disaster, strikes, civil disorder, curtailment of transportation
facilities, or other emergency,
that makes the Agreement inadvisable, illegal or if it is impossible
to provide the facility or hold the event.

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Another Force Majeure Clause:

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Another Force Majeure Clause:
The performance of this Agreement is subject to termination
without liability upon the occurrence of any circumstance
beyond the control of either party . . .

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Another Force Majeure Clause:
The performance of this Agreement is subject to termination
without liability upon the occurrence of any circumstance beyond
the control of either party . . .
such as acts of God, war, acts of terrorism, government
regulations, disaster, strikes, civil disorder, or curtailment of
transportation facilities . . .

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Another Force Majeure Clause:
The performance of this Agreement is subject to termination
without liability upon the occurrence of any circumstance beyond
the control of either party . . .
such as acts of God, war, acts of terrorism, government regulations,
disaster, strikes, civil disorder, or curtailment of transportation
facilities . . .
to the extent that such circumstance makes it illegal or
impossible for the Hotel to provide, or for groups in general to
use, the Hotel facilities.

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Another Force Majeure Clause:
The performance of this Agreement is subject to termination
without liability upon the occurrence of any circumstance beyond
the control of either party . . .
such as acts of God, war, acts of terrorism, government regulations,
disaster, strikes, civil disorder, or curtailment of transportation
facilities . . .
to the extent that such circumstance makes it illegal or
impossible for the Hotel to provide, or for groups in general to
use, the Hotel facilities.

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Victoria’s Secret
On February 20, 2020, Buyer agreed to acquire a 55%
interest in Victoria’s Secret from Seller for $525 million at a
closing they scheduled for early May.
Beginning the next day, the market crashed, and Victoria’s
Secret closed all its stores and furloughed nearly all its
employees.
Last week, Buyer announced that it would not close.

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A Material Adverse Effect Clause

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …
(i) materially impair… the performance by [Seller] of its
obligations under this Agreement …, or

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …
(i) materially impair… the performance by [Seller] of its
obligations under this Agreement …, or
(ii) that has a material adverse effect on the financial condition
… of the Business, excluding … any state of facts …
resulting from … any pandemics … or acts of God….

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …
(i) materially impair… the performance by [Seller] of its
obligations under this Agreement …, or
(ii) that has a material adverse effect on the financial condition
… of the Business, excluding … any state of facts …
resulting from … any pandemics … or acts of God….

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …
(i) materially impair… the performance by [Seller] of its
obligations under this Agreement …, or
(ii) that has a material adverse effect on the financial condition
… of the Business, excluding … any state of facts …
resulting from … any pandemics … or acts of God….

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A Material Adverse Effect Clause
“Material Adverse Effect” means any state of facts … that
would …
(i) materially impair… the performance by [Seller] of its
obligations under this Agreement …, or
(ii) that has a material adverse effect on the financial condition
… of the Business, excluding … any state of facts …
resulting from … any pandemics … or acts of God….

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Closing Thoughts
There’s no deep hidden meaning in force majeure clauses.
They will be enforced according to their terms.
Most have time deadlines for invoking force majeure.
Read these clauses very carefully.

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Thank You
 J. Thomas Beckett
801.536.6603
tbeckett@parsonsbehle.com