The threat presented by Hurricane Florence has forced government officials to order South Carolina residents to evacuate hurricane zones. Safety should always be the No. 1 priority for the millions of individuals and families affected by the storm. The mandatory evacuation and closure of many businesses and schools in the area has shut down a number of manufacturing facilities and distributors located in South Carolina.
For manufacturing suppliers located in South Carolina and others in the supply chain impacted by these shutdowns, companies should look at their contracts to determine “force majeure” rights and requirements. Force majeure refers to circumstances beyond a party’s control that prevent the party from fulfilling its obligations under a contract. Common force majeure provisions may cover several categories of events that could impact suppliers and customers across the supply chain. These provisions often include a list of natural disasters or “acts of God,” including hurricanes.
Any party seeking to invoke the force majeure provision should be able to show that there are no alternative means for delivering parts under the contract. Increased costs alone will not be sufficient to prevail on a claim of force majeure. For example, if a company is able to ship parts from a different manufacturing facility, even if that requires running extra shifts, paying employees overtime and/or expedited freight, then it will be very difficult to show that it was unable to perform under the contract.
Here are some best practices for a company to follow when seeking to invoke the force majeure provision of a contract or when a customer receives a force majeure notice:
Vanessa Miller is a member of Foley’s Automotive and Manufacturing Supply Chain Team. She is counseling a number of clients regarding supply chain issues related to Hurricane Florence. For additional information, please do not hesitate to contact Vanessa Miller at email@example.com or +1 313.234.7130.