March 31, 2020

What Is “Force Majeure” and How Does It Impact a Glass Company

By Paul Bieber

Force majeure is a legal phrase used in most contracts that prevents one or both parties in the contract from being held liable for damages due to an event outside of their control. The current COVID-19 crisis definitely falls into this category. The legality is that you may cancel a contract, or not fulfill the contract, and not be financially penalized.

This can both help you and hurt you. You have a customer that cancelled a new, all-glass door for a building entrance because they ran out of money after the tenants stopped paying their rent. They call you and tell you they are cancelling the contract. You have not put any significant labor on the job other than preparing the estimate. But you do have a contract with your heavy glass door provider and now you don’t have any use for a custom-sized door. If you have force majeure in the fine print of your purchase order, you can cancel the order without penalty.

On the opposite side of this transaction, your door supplier is in a state that is in lockdown. They can cancel your order without paying you a penalty for non-performance. This point about one door is small. But what if this is a contract for windows in a new apartment building? Suddenly, the contractor calls and tells you that they are shutting down their construction. You were supposed to supply and install hundreds of windows. The contractor can easily say force majeure. His shutting down is through no fault of his own. And you can claim this to your window manufacturer. Oops, you already have the windows in your warehouse and the invoice is sitting on your desk. This is where your lawyer comes in to help in your state. Most likely, you can return the windows and pay the return shipping charge. It isn’t your fault you lost the contract, and if you have a force majeure clause in your purchase order you should be in the clear.

Speak to an attorney in your state if you have questions on this. Check your purchase order forms, your customer quotes and your invoices to your customers. There is usually a lot of fine print on the back of all of these documents. If you don’t have this clause, reprint your forms now, if you can find a print shop that is open!

The other common phrase is: Acts of God. This has the same impact as force majeure, but it applies to non-governmental actions. This is a hurricane, tornado or a wildfire that approaches your company.

My wish to you is that you are healthy, that your family is healthy and your co-workers are healthy. Everything else is secondary.