Commercial contracts carry 'force majeure' clauses which say
that major unforseeable events outside of either party's control
can relieve companies of their contractual obligations.
Technology law expert David McIlwaine
of Pinsent Masons, the law firm behind OUT-LAW.COM, said that if
swine flu becomes a major problem in the UK then companies might
start to try to invoke force majeure clauses.
"If suddenly half your workforce is out sick and you are a major
IT services company and obliged to deliver certain service levels
then you might invoke the clause," he said. "It becomes even more
difficult because probably your customer is operating with staff
working from home."
McIlwaine said that there are no examples of companies going to
court to enforce force majeure clauses in relation to plagues or
illnesses, but that most cases are settled out of court.
The swine flue illness is already reported to be disrupting
business. A Google call centre in Hyderaba in India was shut down
last week and 100 workers sent home after one tested positive for
the illness.
If a company wants to rely on a force majeure clause it will
have to defend its decision in court. The court will decide whether
or not the incident qualifies, said McIlwaine.
"They will look at whether it is completely out of the parties'
control. A strike might count, but maybe not if it is a strike of
your own people because you could be said to control that; and they
will look at whether the event actually prevents you delivering on
the contract," he said.
McIlwaine said that force majeure clauses were introduced in the
First and Second World Wars to deal with agreements such as
shipping deals being impossible to fulfil in the context of a major
war.
They have been invoked in relation to riots, he said, but
whether an illness would be justification will depend on the
specifics of a situation.
"If a government declares a state of emergency, for example, or
if it says that people should not go to work, then that could have
an impact," he said. "As could the definitions given, whether the
government calls it a pandemic could be important."
Companies should prepare for negotiations by reviewing their
contracts first of all, McIlwaine advised.
"If you have a force majeure contract which says that you are
relieved of your obligations in case of war, riot or pandemic then
you have a stronger case than someone whose contract doesn't
mention pandemics," he said. "Though I have never seen a force
majeure clause that mentioned pandemics. In that case you are going
to have to rely on it being an act of God for it to qualify."
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