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How Does COVID-19 Affect Force Majeure?

Author: Ellisa Habbart
Published: April 24th. 2020

What Is The Legal Definition of Force Majeure?

The law that governs the agreement at issue determines how force majeure is defined. Every US state has its own set of rules and a summary of each state’s rules is beyond the scope of this writing. However, given the influence of Delaware law on corporate America and the fact that its law is often referred to, and copied by, the other US states, it is useful to understand how Delaware law addresses the issue.

Force Majeure under Delaware Law. Since 2018, provisions in agreements that detail the events that constitute force majeure and how such events affect the rights of the parties are common.

There is no single definition.

It is all about the specific wording of a provision. There are no rules with respect to what constitutes force majeure. Similarly, there are no rules with respect to the consequences of force majeure. Instead, Delaware law permits the parties to a contract to establish the rules they wish to apply and the Delaware courts apply the provisions as the parties craft them. Delaware courts do not believe it is the court’s job to establish the rules.

The intent of the parties matters. The provisions of a contract are strictly construed. Risks associated with a contract are allocated in accordance with the rules established as a result of the parties’ negotiations. As noted by the Delaware Court of Chancery, “[i]t is not the Court’s role to rewrite the contract between sophisticated market participants, allocating the risk of any agreement after the fact, to suit the court’s sense of equity or fairness.” Akorn, Inc. v. Fresenius Kabi AG, No. CV 2018-0300-JTL, 2018 WL 4719347, at 151 (Del. Ch. Oct. 1, 2018), aff’d, 198 A.3d 724 (Del. 2018).

Please visit The Delaware Counsel Group to view the original article.