By Cherie Gopie

Last week’s wave of pub­lic anx­i­ety over the ru­mour of re­gion­al con­flict may have sub­sided for now, but it re­vealed how swift­ly per­cep­tion can shift to pan­ic. In a mat­ter of hours, so­cial me­dia spec­u­la­tion led to long queues and bulk buy­ing at some su­per­mar­kets, not be­cause sup­plies were tru­ly threat­ened, but be­cause peo­ple feared they might be.

For busi­ness­es, the in­ci­dent was a use­ful re­minder that dis­rup­tion does not have to be re­al to be desta­bil­is­ing. Ru­mours, mis­in­for­ma­tion, and fear can trig­ger be­hav­iours that strain sup­ply chains, stress-test con­tracts, and ex­pose weak­ness­es in busi­ness con­ti­nu­ity plan­ning. Even a tem­po­rary scare can prompt dif­fi­cult ques­tions: what hap­pens to con­trac­tu­al oblig­a­tions if trade routes are blocked, op­er­a­tions sus­pend­ed, or staff un­able to re­port for work?

Force ma­jeure and the im­por­tance of pre­ci­sion

The first place many busi­ness lead­ers turn in such mo­ments is the force ma­jeure clause. It is the con­trac­tu­al safe­ty valve in­tend­ed for ex­tra­or­di­nary events such as wars, nat­ur­al dis­as­ters, pan­demics hat make per­for­mance im­pos­si­ble.

But im­pos­si­ble is the key word. Un­der Trinidad and To­ba­go law courts gen­er­al­ly in­ter­pret force ma­jeure nar­row­ly. A ru­mour of war, or the pos­si­bil­i­ty of dis­rup­tion, would not suf­fice. The event must di­rect­ly pre­vent per­for­mance, not mere­ly make it in­con­ve­nient, risky, or ex­pen­sive.

* In re­spect of this clause, con­tracts should be re­viewed to de­ter­mine:

* Spec­i­fy par­tic­u­lar events such as “war,” “civ­il un­rest,” or “gov­ern­ment em­bar­go”;

* Re­quire prompt no­tice to the oth­er par­ty once such an event oc­curs; and

* Clar­i­fy whether oblig­a­tions are sus­pend­ed or ter­mi­nat­ed if the clause is trig­gered.

Gener­ic “acts of God” word­ing may un­for­tu­nate­ly of­fer lit­tle com­fort in prac­tice. Tai­lored draft­ing which re­flects the ac­tu­al risks in your in­dus­try, whether that’s en­er­gy, lo­gis­tics, or pro­fes­sion­al ser­vices is far more ef­fec­tive.

Frus­tra­tion: The com­mon law back­stop

Where no force ma­jeure clause ex­ists, the doc­trine of frus­tra­tion may ap­ply. Frus­tra­tion au­to­mat­i­cal­ly brings a con­tract to an end if an un­fore­seen event makes per­for­mance im­pos­si­ble. It is a nar­row doc­trine: in­con­ve­nience, de­lay, or cost es­ca­la­tion do not qual­i­fy.

For ex­am­ple, if a Trinidad-based sup­pli­er can­not ship goods be­cause all re­gion­al ports are closed due to con­flict, frus­tra­tion may ap­ply. But if goods can still be de­liv­ered via al­ter­na­tive (even more ex­pen­sive) routes, the con­tract is un­like­ly to be frus­trat­ed. Courts ex­pect par­ties es­pe­cial­ly com­mer­cial ones to an­tic­i­pate and al­lo­cate such risks with­in their con­tracts.

In prac­tice, this means that busi­ness­es should stress-test sup­ply and ser­vice con­tracts to de­ter­mine which oblig­a­tions could re­al­is­ti­cal­ly sur­vive se­ri­ous dis­rup­tion, and which would not.

Man­ag­ing volatil­i­ty: Price, sup­ply and rene­go­ti­a­tion claus­es

One les­son from both the COVID-19 pan­dem­ic and last week’s scare is that mar­ket psy­chol­o­gy can move faster than sup­ply lo­gis­tics. Pan­ic buy­ing, ship­ping bot­tle­necks, or sud­den price swings can rip­ple through the econ­o­my long be­fore le­gal oblig­a­tions catch up.

Con­tracts that in­clude price ad­just­ment, hard­ship, or rene­go­ti­a­tion claus­es can help mit­i­gate these ef­fects. Such pro­vi­sions al­low the par­ties to re­vis­it pric­ing or time­lines when ex­ter­nal shocks such as fu­el costs, freight de­lays, or raw ma­te­r­i­al short­ages ex­ceed agreed thresh­olds. While com­mon in the en­er­gy and con­struc­tion sec­tors, they can be adapt­ed for dis­trib­u­tors, man­u­fac­tur­ers, and ser­vice firms as well.

Sim­i­lar­ly, ter­mi­na­tion-for-con­ve­nience and flex­i­ble no­tice pro­vi­sions can pre­serve agili­ty dur­ing un­cer­tain pe­ri­ods. They al­low com­pa­nies to piv­ot sup­pli­ers or de­fer oblig­a­tions law­ful­ly, rather than re­ly­ing on in­for­mal good­will that may evap­o­rate un­der stress.

Be­yond the con­tract: Busi­ness con­ti­nu­ity as le­gal risk man­age­ment

Le­gal risk does not end with the con­tract. A dis­rup­tion whether geopo­lit­i­cal, nat­ur­al, or tech­no­log­i­cal tests how ef­fec­tive­ly a busi­ness can op­er­ate un­der strain. Busi­ness con­ti­nu­ity and dis­as­ter re­cov­ery (BC­DR) frame­works should there­fore be viewed as ex­ten­sions of con­trac­tu­al per­for­mance, not sep­a­rate op­er­a­tional ex­er­cis­es.

Pru­dent or­gan­i­sa­tions should en­sure that:

* Crit­i­cal con­tracts and in­sur­ance doc­u­ments are se­cure­ly stored and ac­ces­si­ble off­site or in the cloud;

* Com­mu­ni­ca­tion trees and del­e­gat­ed au­thor­i­ty struc­tures are up to date, so key de­ci­sions can be made quick­ly;

* In­sur­ance cov­er­age for busi­ness in­ter­rup­tion, civ­il un­rest, or de­layed ship­ments is clear­ly un­der­stood not just as­sumed; and

* Al­ter­na­tive sup­pli­ers and lo­gis­tics part­ners are iden­ti­fied in ad­vance, with pre-ne­go­ti­at­ed stand­by arrange­ments.

In a small, im­port-de­pen­dent econ­o­my like Trinidad and To­ba­go’s, re­silience de­pends as much on fore­sight as on le­gal draft­ing.

Con­clu­sion: Con­tracts and con­fi­dence

Be­fore the next dis­rup­tion, re­al or imag­ined, it is im­por­tant for busi­ness own­ers to re­view con­tracts, test their con­ti­nu­ity plans, and con­firm that risk al­lo­ca­tion match­es mod­ern re­al­i­ties. Be­cause in a cri­sis, the on­ly thing worse than pan­ic is un­cer­tain­ty and well-draft­ed con­tracts re­main one of the best an­ti­dotes to both.

Cherie Gopie is a part­ner at M. Hamel-Smith & Co. She can be reached at mhs@trinidad­law.com.

Dis­claimer: This Col­umn con­tains gen­er­al in­for­ma­tion on le­gal top­ics and does not con­sti­tute le­gal ad­vice.