Are Supply Chain Issues Force Majeure?

 Posted on November 11, 2022 in Uncategorized

With the United States and the rest of the globe experiencing economic downturns, many distributors and suppliers are questioning whether they can perform under their existing contracts. Likewise, consumers are wondering if they’ll receive what they purchased online. Supply chain issues are rampant, affecting the availability of infant formula, cat food, and any number of products and services

Force majeure clauses excuse parties from performing under the contract in limited situations. If you’re experiencing supply chain woes, you may wonder, “Are supply chain issues force majeure?” The answer depends on the applicable law and the unique circumstances of your case.

Mallery, s.c. provides sophisticated legal services of a quality you’d expect at a large firm but the personalized attention of a boutique firm. We provide legal counsel to businesses and individuals throughout Wisconsin and take pride in our diligent and compassionate approach

How Is a Contract Legally Binding in Wisconsin?

What makes a contract binding is the presence of the following elements of a legal agreement:

• Offer. One party made a valid offer to another party to buy or sell something to them in exchange for value. 
• Acceptance. A party accepted the offer on the stated terms. If the purported approval of an offer adds or modifies the material terms of the original proposal, it’s probably not an acceptance. It’s a counteroffer. 
• Consideration. Each party has something to gain and lose if the contract goes through as planned. For example, the seller manufactures and delivers goods to the buyer in exchange for receiving the purchase price. 
• The statute of frauds is met. Wisconsin law has rules about what contracts need to be in writing and signed by the party against whom the agreement is being enforced. For example, in most situations, contracts for the sale of goods for $500 or more must be in writing. 
• Legal. The subject of the contract is lawful, and everyone who entered into the agreement had the authority to do so. 

The particular language of each contract depends on what the parties decide on and the nature of the deal. For example, complex agreements between sophisticated business parties may have more terms than between consumers and merchants

What Are the Types of Breaches of Contracts in Wisconsin?

Are supply chain issues force majeure? Before we can answer that question, we need to explore the types of breaches that can come into play.  

Material Breach

A material breach speaks to the heart of the agreement between the parties. When a material breach occurs, one or both parties significantly break the promise they made under the deal. For example, a material breach occurs if the seller fails or refuses to deliver the goods promised under the contract

Material breaches of contract can form the basis for legal claims against the non-performing party. The breaching party may have only partially performed or failed to take any action under the contract

Minor Breach

Minor breaches are errors or mistakes that don’t substantially impact the underlying transaction. For example, a clerical error or, in some cases, a brief performance delay without significant consequences might be a minor breach

Anticipatory Breach

Anticipatory breaches are when a party notifies the other party ahead of time that they’re unable or unwilling to perform under the contract when the time comes. For example, an anticipatory breach may occur if the closing date is on May 16 and one party sends a message to the other party on May 10 to tell them they won’t follow through.

If supply chain issues may or will keep the breaching party from performing, they may choose to provide advance notice to the other party

If you receive notice that the other party won’t perform under the contract, the subsequent steps you take are critical. You have a duty to mitigate your damages. This is especially true when you receive prior notice that the other party won’t or can’t perform. A breach of contract attorney can help you understand what steps you can take to limit your damages and bring a claim against the breaching party

Actual Breach

When an actual breach occurs, the time for performance has come and gone, and the party failed to deliver what they promised

When Is Breaching a Contract Legal in Wisconsin?

Having an enforceable contract doesn’t mean that parties must perform under any circumstances. In some cases, breaching a contract may be legal. If doing so would be impossible or impractical, you or the other party may not have to perform. Further, if the underlying purpose of the contract is frustrated or moot, a breach may be legal. 

Additionally, force majeure clauses allow parties to breach the contract if they cannot perform due to forces outside their control. Acts of God, emergencies, and, in some cases, supply chain issues can exempt or modify performance. Whether this holds true in your situation depends on many factors, such as the language of the force majeure clause and the particular circumstances. 

Mallery, s.c.—Exceptional Breach of Contract Attorneys Serving Wisconsin

If you are experiencing a breach of contract dispute or want to know how to get out of a contract, call our legal team today to schedule a consultation

We provide outstanding service to our clients, who praise us for understanding their perspectives and working to their strengths. We offer a full range of legal services for business owners and believe in a collaborative approach to develop long-term relationships that serve the best interests of our clients.