Jason Medley of Clark Hill discusses the recent focus on “force majeure” clauses in contracts and proposes a more important practical reality regarding the state of commercial finance.
During the COVID-19 pandemic, we are experiencing a major slowdown of the payment cycle for obligors and the outright cessation of many businesses. Many factors have corresponding lines of credit or refactoring agreements, so this crunch cuts both ways.
What is a financier to do? Much of the focus has centered on the impact of the “force majeure” clause in contracts. This focus is too myopic. Most factoring agreements and commercial loan agreements do not even have specific force majeure clauses like many commercial lease agreements or other performance-based contracts.
