With Stewart Argo, Associate – Commercial
In this webinar, we will give some background to the reasons behind force majeure, severance and waiver clauses and key considerations when drafting these into a contract.
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Webinar transcript
(Please note this is auto-generated and un-edited)
Hi, I'm Stewart Argo an associate in the Commission IP team here at Shakespeare Martin, I help clients with a wide range of commercial issues, including commercial contracts, IT, ..., intellectual property, and assist clients with the legal documentation underpinning their commercial transactions.
0:27
Welcome to today's webinar, which is the second of a three part series on Boilerplate Clauses.
0:33
In this second part, I'll be discussing forced measure, severance waiver.
0:38
On your screen, you'll see the chat icon.
0:40
Please use this to ask any questions. And we will respond to you directly after this training webinar first. Monsieur, If the contract is silent as her party being presented from formula contract by circumstances beyond their control there is no implied term excusing party from format contract if presented by the census.
0:58
The doctrine of frustration may apply, but only in certain restrictive circumstances, and there is often limited relief and remedies.
1:07
The ... case of Canary Wharf and the European Medicines Agency is a recent example of the limitations of the doctrine of frustration.
1:17
The European Medicines Agency is an agency of the EU. It entered into a lease of a property in Canary Wharf for 25 years in 20 14 with the claimant.
1:27
The European Medicines Agency argued that the UK's departure from the EU were frustrated space, either by Supervening illegality, wasn't the lease, should be discharged as frustration of a common purpose.
1:40
In relation to the form argument, it has argued that it would no longer be lawful for it to pay the rent us and UK leaves the EU, because this would be a virus.
1:49
The Judge rejected both arguments and how's that neither frustration by Cyprian, illegality, or frustration by common purpose.
1:59
The Judge Houde in relation to Frustration by Ceferin illegality that while the protections conferred on the European Medicines Agency brought irrelevant EU regulations would be reduced as a result the UK's departure from the EU. They would still have capacity to deal with the immovable property in a non EU country and therefore have capacity to continue performing its obligations on the list.
2:21
This was despite the judge acknowledging that the European Medicines Agency was obliged by 28 EU regulation to move its headquarters to Amsterdam from London and that there were strong political reasons for the European Medicines Agency not to remain in the UK following Brexit.
2:42
With regard to frustration of common purpose of the European Medicines Agency, argument was rejected, and it was held at the parties had divergent purposes.
2:49
The landlord's purpose was long term cash flow at the highest rate, and a preparedness to allow the European Medicines Agency have a say in the buildings configuration provided. This was not adverse to run those interests.
3:02
On the other hand, the European Medicines Agency purpose was for the premises for expedition tab and paying the lowest possible rent, therefore this argument is also rejected.
3:16
So what should you consider when deciding whether to include a force materials?
3:21
Firstly, the nature of the parties obligations says one party, more likely to be affected by the force majeure event and the other. For example, in a contract for the supply of goods and services, supplier is more likely to be at risk, or Force majeure event than the customer, as a customer, find obligation, in most cases will be to simply make payment.
3:41
Secondly, the ability imposed to impose duties to communicate and work and work, to reduce the impact of unforeseen events may be beneficial if you are likely to be the non affected party.
3:53
You would, in those circumstances, you want as much information about the force majeure event and you would want the supplier to commit to take steps to mitigate these risks.
4:03
Thirdly, the nature of the contract, For example, if you go to the short-term contract, the risk of a force measure clause coming into play or being affected by Force majeure event is unlikely, it is less likely to happen in a longer term contract.
4:18
So for, for those short-term contracts, you may, you, may wish to 2, 2, not in cases should close. Finally whether the risk of formless becoming impossible is covered elsewhere in the contract. So for example, there might be some death disaster recovery provisions which you can rely on instead.
4:38
So here is an example of enforcement clause.
4:41
We have highlighted in red elements of the clause that often subject to discussion.
4:47
So, when clause 1.1, this contains a definition of what is the Force majeure event.
4:55
The key point here is to try not to roll out Santa Claus. Make sure that the list of events is relevant to your particular industry, not just a standard list. And, if you are, the part here is likely to be not affected by.
5:09
Force Majeure Event, be wary of, any events are not within our within a party's control. For example, labor tried to street strikes, Industrial action or lockouts if that's concerning the, for example, is supported by his own staff and employees and that could be within their control and write down and machinery choice of materials known forms of suppliers or contractors that the argument is within the control of a supplier to, to manage and maintain.
5:39
Applause 1.2. This is a set that sets out circumstances where the clause can be invoked and the effect of invoking the clause.
5:50
For a customer, you should be wary of an affected parties trying to address across the ... force. Measure is not the only reason for the non performance, for example, here, the inclusion of work, or, in part, she has, a customer you should insist on, on, force. Measure being so the sole cause of the non performance.
6:13
Let's close 1.3 that sets out set formalities that the affected parties should comply with an event. There's a force majeure clause, as much data as a customer, it's important that you're notified as the fourth mature students possible provided with any further information required to manage.
6:33
Manage the situation within your supply chain. And you'd also want splash take steps to mitigate its losses. On the other hand, if you supply heat to consider carefully what you're agreeing to in relation to these requirements, you don't want to make it unnecessarily difficult you know to rely on. For, for example, if you're relying on the clauses conditional upon certain notice provisions, you don't want to unnecessary, unnecessary trip yourself up from rely on that caused by the failure to rely on those, those requirements.
7:07
And finally, clause 1.4.
7:10
This is a termination right? for for a party or the parties, If the event tennis for, for a continuous period, can you specify, period here, says that either party may terminate by, given the game, or giving notice. Now, usually, it is only the non effective boss that she has the right to terminate. So, if you are a customer or a place, that's kind of less likely to be affected by a force majeure event than you would seek to amend, to say that, that the non ....
7:46
And in terms of forced monsieur clauses in generally, in general, you should avoid simply stating that the usual forced monsieur clauses apply or similar.
7:56
As we said before, force measure, in itself does not have any legal meaning. What is the force majeure event is, tenant by, what is set out in the contract.
8:06
And again, be aware that the clause is likely to be subject to the reasonable tetanus tests on the actor.
8:13
Turning away from the drafting, what should a party effect by Force Majeure Event say that, when seeking to false, false vehicles, Firstly, is important. Members of the party can invoke a Force majeure provision generally, only where it is presented for forming its contractual obligations. The fact that performance may be more difficult and more costly would not normally be sufficient.
8:38
So, turning to the provisions themselves, you need to look at how Force majeure is defined. As we've discussed, Force Majeure event is determined by the express terms, as contract.
8:49
You need to look at whether any steps need to be taken to benefit from falls from Zurich provision and it's important to comply with those steps.
8:56
Finally, it's what the effect of invoking that fulfills your provision is usually it's two to suspend contractual obligations for a period of time or two to allow party for being released and was obligations under the agreement. However, you need to be aware also that it gives, I usually will give a right for a party, or to terminate the contract as a Force Majeure Event exchange, beyond the period of time. So, when invoking the crawlers, you need to be aware of any particular deadlines for phone calls.
9:32
Can you communicate with customers and suppliers outside of resources to close?
9:37
Ideally, you should manage your supply chain and manage customers without resorting to two to the clause.
9:46
Should review the agreement as a whole for unbroken enforcement, sure to click, fix it, or how any exclusivity arrangements are affected.
9:53
Our liability and liquidated damages provisions will operate at any other termination rights in a contract.
10:02
So, turning to severance. The purpose of a severance scores is to provide that the contract survives the deletion of any unenforceable provisions.
10:12
The clause attempts to avoid the risk of a court determining the entire contract is enforceable a event that a clause within the contract is is unenforceable.
10:23
When deciding whether to include this clause, you should you should consider the following. So is there any doubt about the enforceability of the provision?
10:31
For example, it says any decisions or limitations and product liability And in non-compete or non non solicitation restrictions, if there are, then should look to create a severance close. Again, the duration of contract is also a factor.
10:46
And the risk profile of the contract as to whether you would include a San Francisco.
10:51
There are, however, limits on the effectiveness of severance close. The inclusion of a Severance Clause.
10:58
We're not always ensure that the courts will suffer the clause.
11:04
This has demonstrated Tillman and Egon Zehnder.
11:08
In this case, the Supreme Court restated the law on when the courts will choose to seven and unenforceable close.
11:14
In this case, the defendant was a Senior Boys. The climate is contract to employment Container Restrictive Covenant that stated that she would not, for a period of six months, after her appointment, directly or indirectly in cash or be concerned or interested in any business carried on in competition with any of the businesses of the company or any group company, which were carried on the termination date or during the period of 12 months, prior to that date, and with which, it was material sand. During that period.
11:44
Following the termination of her employment, the defendant wished to take employment and as a competitor within six months.
11:52
On the question of Severance, Supreme Court held that there were three requirements for permission to be separable.
11:58
Division had to be capable of being removed without adding to the rumanian wording called the Blue Pencil test. The remaining terms had to be supported by adequate consideration and removal of the provisions should not generate any major change in the character of the contract.
12:15
Finally, turn to waiver, Right, can be waived in three ways, by contract or date, the abandonment of a right by entering into a binding contract or data that effect. By election taking of a deliberate choice by a party. Well, it has an oxidant. That could be excised only once or bus stop, or party acting in such a way that is fair to treat it as having made a deliberate choice to waive.
12:40
Whether or not it is in fact has including an appropriate no way of close, can help to avoid unintended waiver, particularly lay. There are, however, limits to the effectiveness of a no waiver close.
12:55
Intelli to international Card company, essay and others, and post office limited.
13:01
Close 16 of the agreement between the parties provide it. In no event shall any delay, neglect or forbearance on the part of any party and enforcing in whole or in part, and the provision of this agreement be it will be deemed to be a wave of their role or a waiver of any other provision, or shall, in any way prejudice any right of that party under this agreement.
13:23
The claimant failed to provide contractually required guarantees, which gave the defendant the right terminate the agreement.
13:30
However, the defendant did not serve notice of termination until 11 months after the breech.
13:36
2009 did not make any protest or did not reserve its rights and rush to the British during that period.
13:42
The Court of Appeal held and had elected to the agreement.
13:47
Saying it's conduct was clear and unequivocal communication of such an election, clause 16 could not prevent the existence of existence of an election. It either existed or it did not.
14:01
In terms of traffic on highway the clause, we should ensure that the tools include statements. That waiver is only effective. if it is in writing. The wave of a breach of a clause one occasion will not be a waiver of a future breached the same clothes. Waiver of a breach, of course, will not be a waiver of any other clause.
14:20
And no way there is no waiver. If there's a delay in asserting rights, they start last point.
14:26
Again, should be aware, that has limited effect, given the case law, on waiver and delay.
14:38
That brings us to the end of this webinar. I hope you found it useful and relevant, if you'd like to ask us any point in more detail, or have any other queries, please do contact me. My details are on the slide, and I'll be happy to help out.
14:51
Finally, please do visit SHRM, a on demand on our website to access recordings of our webinars and attaching my talks. And please do join in on our conversation on LinkedIn and Twitter.
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