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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. One of those tools comes from Evisort, whose CEO Jerry Ting notes, "I've never seen such an urgent need to understand data in contracts globally in such a short amount of time," and he further noted that he has spoken with a number of GCs that have been feverishly reviewing agreements, like leases, by hand in an attempt to get a sense of their Force Majeure exposure.

On March 13, Evisort released a video tutorial that demonstrates how a legal department could quickly determine their company's Force Majeure exposure across all their contracts in just minutes. Since the exact language of the clause is pulled from the contract, companies can also quickly identify what qualifying events may have been directly enumerated in the contract. Finally, since Evisort allows companies to quickly identify problematic language that may be present, like the term "pandemic", companies can prepare to face disputes before they arise.

For companies that may be looking to invoke Force Majeure for relief from performance, Evisort's AI software can also report which contracts do not have a Force Majeure clause, which means that Force Majeure may be much more arduous of a claim to make.

There are very few people that could have predicted the impact Coronavirus would have on the world prior to January or February, and almost no one that could have predicted the impending escalation of legal work from potential Force Majeure claims. Fortunately, the legal tech industry has been able to quickly shift gears and provide relief for legal departments across the country.

 

Samuel Garcia is a recent graduate of Harvard Law School and currently a Senior Associate at Amplo, a Venture Capital fund.