At the time of this blog, the COVID -19 has really impacted global economy. This highlights the global nature of business these days and how reliant we are with each other. A problem in a few countries, especially China, has really impacted businesses. This blog will highlight some of the important businesses clauses that businesses will have to understand and rely on.
This seemingly “standard clause” would be the most referred clause since the outbreak began. A Force Majeure clause is a clause that is included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations. However, I have seen some clauses that does not include health outbreaks. It is arguable that clauses that do not specify would not fall under Force Majeure. This would need to be brought to Court to test the clause.
The importance of this clause will be delays that happen. When does the delivery date start? Can it be extended? Does time start after the goods has arrived? What is the consequences for delay in delivery?
When your contract requires scheduled payments, when do have to make payments? This should be read together and should be in tandem with the delivery date clause.
Extension of Time
If your Delivery Date and Payment Schedule does not favor you, you need to read the Extension of Time clause. Can you extend the time in the 1st place? If there is no specific clause, can one be implied into the contract?
Once extension of time is given, make sure it is made in writing. This is to ensure parties “changing” their minds.
Liquidated Ascertained Damages (LAD)
This is where it hurts the most. If there is a delay in delivery or payment, there could be LAD clause. Not all contracts have this but be extra careful if your contract has this clause. You don’t want to be sued for breach of contract AND be sued for Liquidated Ascertained Damages. Some LAD clause have a daily calculation.
Be sure you have your contracts in place. Make sure your know the contents of your contracts to ensure that your business is not interrupted or worst, closed down.
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NIK ERMAN NIK ROSELI
Commercial & Sports Lawyer