Recently, I shared insights about the use of force majeure with Aviation Week Executive Editor Michael Bruno for his story, “Aerospace Industry Mulls Force Majeure In Wake Of Tariffs.”
In light of anticipated tariffs this year, aerospace suppliers are searching for strategies to account for higher prices in their operations and financial plans. Reviewing their contracts, they may be disappointed that force majeure may not provide the hoped for protection against a sudden spike in prices.
“The aerospace and defense community just needs to recognize that this is not the first time that somebody has tried to claim force majeure because of a tariff,” I said. “It’s not the panacea.”
I indicated that not only does the application of force majeure depend on which country you are in, but in the U.S., it depends on the state that is the venue for legal disputes. Some states take a restrictive approach and require a triggering event cited for invoking force majeure that typically includes destructive fires, labor strikes, acts of God, etc.
In the wake of the COVID-19 pandemic, I added that the industry has learned to make sure the words “pandemic” and “epidemic” are listed in their contracts and that future force majeure clauses in supplier contracts will include “tariff.” Industry seemed to be headed for a wave of force majeure invocations during COVID-19, but the wave never arrived. “In COVID-19, a lot of aerospace and defense companies did not formally send those letters in the traditional way, which was, ‘I declare force majeure, I trigger the contract provision, and I’m basically starting the clock,’” I pointed out. “They sent letters that said, ‘We might declare force majeure, and we just want to give you a heads-up warning.’ I think, just like in COVID-19, there are going to be winners and losers with respect to the ability to have those negotiations and how productive those negotiations are.” Read the article.