Auto Supply Chain Prophets hosts Cathy Fisher, Terry Onica and Jan Griffiths interviewed Warner Norcross + Judd Partner Katherine Pullen on force majeure in the automotive supply industry, lessons learned from COVID-19 and the impact to suppliers’ terms and conditions now and into the future.
In this podcast, Pullen answered the question: “Has COVID-19 triggered an overuse of force majeure as a legal remedy in today’s current automotive environment?” Pullen commented that prior to COVID-19, force majeure was a contractual term most people often skimmed over. Now, force majeure provisions are some of the most invoked and analyzed terms, but they are sometimes misunderstood. Specifically, some suppliers are declaring a force majeure event, but then, in the same breath, agreeing to continue shipping if the customer will consent to a price increase. Pullen cautioned that price and force majeure terms should typically be analyzed independent of one another. A force majeure event generally only occurs when performance under a contract is rendered impossible by an unforeseeable event, and in general, the unprofitability of a contract or higher costs will not excuse performance. Pullen urged listeners to review their contracts to understand what circumstances constitute force majeure events and what notices are required.
Pullen also offered lessons learned from COVID-19 and insight into how suppliers can minimize their exposure with customers and their supply chain. In short, “prepare for the unexpected.” Suppliers should review their existing and new contracts and consider whether there are gaps to be filled or revisions required to address the lessons learned during the pandemic.
To listen to the Auto Supply Chain Prophets interview “The Force Majeure Pandemic,” click here.
Pullen is a litigator who represents automotive suppliers and other businesses in a variety of issues, including complex and high-stakes matters. She regularly advises automotive suppliers with contract disputes and negotiations, stop-shipment threats and a variety of other matters.
Warner’s Automotive Industry Group
With deep roots in the heart of the U.S. automotive industry, Warner provides proactive, timely and cutting-edge advice to suppliers throughout Detroit, North America, Mexico and around the globe. Our attorneys are recognized leaders in every area of law that impacts the global automotive and mobility market. We understand the complex relationships between parts suppliers and vehicle manufacturers, and we stay on top of laws, regulations and critical issues that are transforming this industry.