Chihuahua, Chih., March 18th, 2020.

Dear Clients and Friends,

In light of the declaration of World Health Organization (WHO) of coronavirus COVID-19 as a pandemic and the increasing cases in Mexico, there are several legal implications that could affect your company’s performance. Including issues related to disruption in production and supply chains.

In this case the so called “force majeure clauses” are of particular interest, as they foresee the inability to perform the fulfillment of an obligation, due to an extraordinary event beyond the will and/or control of the parties. In that sense, a party may be released from the fulfilment of its obligation and thus from a conventional penalty (if agreed) and/or the payment of damages. For this to happen, several characteristics must be met, which may be provided in the contract or in current legislation, if a force majeure provision is not included in such agreement.

To evaluate whether or not the current situation meets the terms and conditions established in your contract, purchase order or in current legislation, it is necessary to carry out a detailed analysis of the conditions and the clause in question. Standard clauses commonly used define and include a non-exhaustive list of examples of events constituting a force majeure, as it lists unforeseen events such as a pandemic, in this particular case COVID-19.

Nevertheless, the wording of the said terms and conditions may or may not be clear as to whether such circumstance may be considered as an act of God or force majeure. Therefore, each event must be evaluated in light of the specific facts in question to avoid triggering an unintentional breach.

In the event that the contract or purchase order does not provide a force majeure clause; or in case there is any doubt as to whether the current situation meets the terms and conditions established in such clause; if one of the parties, whether a supplier or customer, excuses its compliance; or if you believe that your company will be affected by the outbreak of COVID-19, we look forward in providing you with our legal expertise and timely legal support required to help and prevent any legal risk arising from the current situation.

You can contact either, Rolando Castellanos-Macal at rcastellanos@iclmx.com; and Jorge Almanza-Ríos at jalmanza@iclmx.com; for any further information that you might require.
As always, we remain at your service.