Pandemics and natural disasters have created, and will continue to create, uncertain economic conditions for the world. With respect to outsourcing arrangements, these situations may result in site closures, a failure to meet service levels, delays due to a failure to perform customer obligations required for performance by the provider, or labor and product shortages.
As such, businesses are (and if they are not, they should be) scrutinizing their commercial agreements in order to understand their obligations and rights where there is an actual or prospective failure in performance as a result of a significant unforeseen event..
If it is determined that the force majeure can be invoked, both parties must proceed on a reasonable efforts basis unless otherwise agreed. The party invoking the clause must show that it has taken all reasonable steps to avoid the event and its consequences and that it has pursued all reasonable alternative methods of performing its obligations under the contract. Correspondingly, the other party must take all reasonable steps to mitigate its damages. For some disasters, what is reasonable under the circumstances will evolve as the problem unfolds.
For example, during a pandemic, requiring a party to violate a government order (such as quarantine) would not be reasonable. However, requesting a party to perform certain obligations while following social distancing guidance would be appropriate.
Consider the interrelationship between a force majeure and business continuity obligations. For example, if a primary outsourced site is ordered to close due to social distancing in one jurisdiction but a backup site in another jurisdiction is still legally permitted to operate, could the provider be excused under a force majeure clause if it shut down its other site on its own initiative out of prudence despite the failure of the local government to order such an action? Probably not.