Perhaps one of the most overlooked, skipped over, and rubber-stamped of clauses in any contract is the one that deals with force majeure. Almost all contracts have such a clause, but almost never are they discussed, contested, or enforced. But should the relative lack of attention to force majeure change in future?
The world is currently going through the global COVID-19 pandemic which – in the great majority of contracts – qualifies as “a force majeure event”? In the world of media specifically, should advertisers look to rewrite or tighten the force majeure clauses that are written in contracts with their agency partners?
When media meets force majeure
Force majeure is defined as “unforeseeable circumstances that prevent one party from fulfilling their obligations under the terms of a contract”. Force majeure events come in many forms, including:
- Industrial strife – strikes, lockouts, or industrial action
- Civil commotion – riots, invasions, war (declared or not), and acts of terrorism
- Fire, explosions, storms, or other natural disasters, sometimes called “acts of God”
- And… widespread disease in the form of epidemics or pandemics
In advertiser-agency contracts, the onus of performance and delivery of services rests with the agency. Brands employs agencies – and also advertising and marketing technology companies, as well as direct deals with bigger publishers and social media platforms – to enable them to make ads, buy space, and run campaigns that communicate with their customers.
Agencies are required to fulfil their obligations specified under the contract in timely fashion, and the clauses on which our clients have the most concern relate to payment, rebates, audit rights, and media inventory, as well as to intellectual property development – all clauses that relate to trading media and making ads. Advertisers’ part of the bargain is comparatively simple: paying for the services from agency partners within the period agreed in the contract.
Pandemics as force majeure
The dystopian threat of a global pandemic has been quietly bubbling away for most of the past 20 years, what with avian flu, swine flu, SARS, and MERS. It is only with COVID-19 that this threat has become a reality. In most advertiser-agency contracts, a global pandemic typically counts as a force majeure event.
Clauses often give a period of grace for one party (or both) to deliver contracted services – and for global advertisers and their agencies, these are typically between 30 and 60 days. After that grace period for force majeure, advertisers are entitled to terminate the contract and seek representation from a company that can fulfil its obligations, the client’s requirements.
If either party is unable to fulfil its contracted obligations, force majeure clauses usually require that party to inform the other party of the disruption to service. And while most force majeure clauses are similar, some do attempt to cover all bases by including such subclauses and conditions as “the death of a monarch or leader that results in unusual disruption to media demand and supply” or “the reduction or removal of entire amount of media supply from wholly state owned electronic media”.
Under the coronavirus pandemic, we are not – so far – aware of any brands looking to invoke the force majeure clauses in their contracts with their agency partners. This is not because the current pandemic does not fall under the terms of the clauses – far from it. There has been technical infrastructure both client and agency side, the ubiquity of superfast broadband in most major markets and the almost seamless transition most companies achieved in moving from working from offices to working from home. Quite simply, it hasn’t been necessary.
From Zoom to Dropbox, Microsoft Teams to WeTransfer, for brands still able to trade and willing to advertise, the reality of working under lockdown has allowed force majeure clauses to remain uninvoked.
It’s certainly true that social distancing measures and government-mandated lockdown rules have meant that creative agencies haven’t had the freedom to make ads as they did before 2020.“Shot on iPhone” and other homemade ads early into the pandemic was the result. But, with workplace restrictions now lifting in many markets and creative agencies either cleverly recutting existing creative and footage or moving to augmented reality, even they are able to fulfil their obligations.
With most advertising now digital and 90% of digital display ads traded programmatically, media trading has been able to carry on during the pandemic, too. How different it would have been 20, 30, 40 years ago when so many processes were performed manually? A pandemic in the 1980s would have caused TV schedules and TV ads to have gone dark, but not so today.
A resilient industry
While it’s true that some aspects of marketing and reporting on performance have slowed down a little, on the vast majority of issues agencies and advertisers are working together smarter and faster than before. Indeed, many have highlighted working practices imposed and enforced by the pandemic that they’ll be holding onto indefinitely in the medium-term future.
With all companies, client and agency side, in every country around the world affected by the 2020 pandemic, there’s also a very real sense in which we are all in this together. This is genuinely new and different.
Historically, there have been instances where force majeure clauses were invoked by advertisers because unforeseeable events very directly and negatively impacted on their brands’ ability to trade or communicate. These include train or plane companies looking to pull ads in the wake of a crash, tourist boards responding to war or terrorist attacks in their destinations, and big energy companies seeking to cease advertising after an oil spill.
Collaboration before contract negotiation
But, during COVID-19, the pandemic has impacted all parties – advertisers and agencies – at the same time. In many client relationships we know, advertisers and their agency partners have worked together more closely this year than before. With almost everyone working from home and almost no-one travelling to regional or global meetings, whenever challenges have come up a quick video conference can usually iron out even the thorniest of problems.
Increased willingness and availability to resolve issues that might otherwise have waited for a weekly call or a monthly status meeting improve relationships and make conflict actually much less likely. What’s more, where advertisers unable to trade have pulled campaigns – notably in the travel, hospitality, and entertainment sectors – this has been dealt with sympathetically by agency partners.
So, while it makes sense to read and negotiate on every clause in your contract, it comes as something of a relief that the force majeure clause is not yet another thing to worry about as business and marketing looks to recover and grow on the other side of coronavirus. Brands might chose to tighten invocation terms – from 60 to 30 days – but with most clauses very similar and most contingencies more than adequately covered, it seems as if this particular area of law may have been overtaken by advances in technology.