Rhein Niedrigwasser

Delivery bottlenecks due to low levels on the waterways are a typical example that can lead to companies having to declare „force majeure“. (Bild: Comofoto – stock.adobe.com)

The term “force majeure”, which has such an almost charming French ring to it, refers to a crisis situation which can overtake an enterprise or an institution in spite of all precautionary measures. The concept of force majeure covers natural disasters such as earthquakes, floods, severe storms, or volcanic eruptions, as well as fires, civil wars, hostage taking, and sabotage. That is merely an excerpt from a long list of possible events which unexpectedly and without any fault might interrupt the production chain in a company. They may not only unexpectedly cause delivery problems but in extreme cases threaten the very existence of an enterprise. Traffic accidents, terrorism, or under certain legal circumstances also strikes belong to the force-majeure category. In today‘s globalised economy, the consequences will be felt not only in the directly affected region or in a single company. Disruptions can affect all actors within the value chain, from manufacturer via supplier, to end user.

Communication has Legal Consequences

The law assumes that force majeure applies to an event if it “comes from outside, is unforeseeable, and cannot be averted, even with the utmost diligence that can reasonably be expected”. The German legal system assigns force-majeure cases to the domain of civil law. According to Section 275 of the German civil code (BGB), contractual partners are released from contractual obligations if rendering of a service by the liable party or by anyone is impossible. Force-majeure cases are more difficult to resolve in English-speaking counties. In those countries, Common Law does not release the supplier from his obligation to supply and under certain circumstances provides for damage claims. And also in the German legal system there are cases which are not unequivocal, for example in the case of shortages of raw materials which the manufacturer could not foresee of avert. For this reason, many General Terms and Conditions and contracts contain special “force-majeure clauses” providing detailed rules for compensation claims. However, force majeure gives rise to questions concerning not only questions of liability with regard to fulfilment of contractual obligations. In the process of crisis management, particular attention should be paid to the duty to inform customers. When does a customer have to be informed, and how large is the circle of those who have to be informed? It should also be noted that no kind of automatism when force majeure is concerned.

Specifically, this means: Each enterprise must decide for itself whether force majeure does indeed have to be declared. In order that force majeure can be declared, all communication must be “prompt, without undue delay”. However, that does not exclude ascertaining whether alternative production or an alternative supply is possible. If your company should be affected by force majeure, you should clarify beforehand which test measures should be undertaken and the latest stage at which it should be decided to give notice of force majeure. When the time comes to do so, each individual contractual partner must be informed in a customer letter or other written form of communication. This also means that if your supplier is unable to supply and cites force majeure as the reason, his notification does not release your company from your duty to inform your own customers. If far-reaching financial consequences of relevance for the capital market are to be expected, then the usual duties to inform shareholders apply. But beware of all-too-hastily issued wide-scale announcements: These could raise competition law questions.

Neither Too Much nor Too Little Communication

Force majeure is a crisis, for which it is possible to be well prepared. In view of possible legal consequences of “too much” or “too little” communication, the relevant processes, responsibilities, and stakeholders should be clearly named beforehand. Like a general crisis manual, a force-majeure manual which sets out internal procedures and responsibilities between all the departments involved in an emergency can be useful. What is allowed to be said and how should it be said? And another important point: Who has the right to speak to the press? Many of these questions can be clarified in advance and answered in an agreed wording using standard texts.

Whatever applies to a general crisis manual is also valid for the force-majeure manual: Whether it exists in printed or in digital form is not particularly relevant. More important is that it is up to date and that all responsible persons know where to find it. Chapters about functions, responsibilities, accessibilities, telephone lists, behavioural conventions/information exchange or operating procedures. As for any crisis communication, in the case of a force-majeure event: Communication should be based on principles of openness, transparency, credibility, and dialogue orientation (active and in good time), and be truthful (factual), comprehensible (short, simple, vivid), and consistent.

Multicultural group of young people men and women looking shocked at mobile phone

Companies should not underestimate the impact of social media channels in the event of a crisis. Picture: pathdoc – stock.adobe.com

Monitoring of Social Media Facilitates Rapid Reaction

Do not underestimate the impact of social-media channels. Speculations about the extent of a crisis caused by a force majeure event soon become hashtags; anybody can send and receive news, there are no longer any hard and fast boundaries. Everybody is in a position to reach a large community with his or her messages through social-media channels. The expectation to receive rapid answers or statements at any time of day or night is very high among all target groups. By setting up a monitoring system in advance, you will be able to react faster in the case of a crisis and thus curb the spread of fake news. In addition, you retain the prerogative of interpretation of the situation and thus limit the extent of the crisis. Moreover, you can also assure that the corporate image does not suffer damage in the crisis situation.

A healthy measure of competent and open information towards customers and suppliers will ensure that your stakeholders trust you also in the case of a crisis. Be careful in your communications of force majeure, but do not delay in contacting your customers and suppliers and be prepared to answer all their questions. Report the facts calmly and as accurately as possible and offer your customers the opportunity to jointly seek possible solutions. Successful communication during a crisis enhances trust in your company and promotes stable customer and supplier relations. And as for every crisis: Successful crisis management is a team effort but the responsibility for good preparation and an orderly course of events lies with management.

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