Force Majeure

This blog is one-part nostalgia and one-part cautionary tale. Take it with a grain of salt…but do not take it for granted.

I recently completed a project wherein I assisted a client in negotiating a contract with a major customer, as I have countless times before. Something was different this time; but I will get back to that a bit later.

Nostalgia

As I write this, I am thinking back to 1965. I remember, as if it were yesterday, grabbing my gas can to go to the local Sinclair station and invest 31 cents in my thriving lawn mowing business. As I was leaving to buy a gallon of ethyl, the adults sweltering on the front porch were debating about when we would see one dollar per gallon gasoline. Never, I thought, chuckling under my breath as my PF Flyers pedaled me away on my Schwinn Stingray down a Southside Chicago street.

You may know 1965 from memories or from history books. Ever heard of Dr. Martin Luther King Jr. and the civil rights march from Selma to Montgomery, The Voting Rights Act which guaranteed African Americans the right to vote, Vietnam, St. Louis Gateway Arch opening, Watts riots?

Or how about these statistics?

Yearly Inflation Rate in U.S. 1.59%
Year End Close Dow Jones Industrial Average 969
Average Cost of new house $13,600
Average Income per year $6,450
Average Cost of a new car $2,650
Loaf of bread 21 cents
Average Rent per month $118

NCAA football contract let for total of $32 million (one school today receives a $60 million share of the current TV contract)

Little did we realize America and the world were starting to change.  Just one year earlier the late, great Sam Cooke foretold of coming change in his classic hit, A Change is Gonna Come.  And did it ever! 

To give you an idea of how change has accelerated in the past 55 years, it took the DJIA until 1972 to close above 1,000. Can you imagine waiting seven years for the Dow to advance 31 points now? That happens in a nanosecond today’s market. Jeff Bezos’ picking up a cool $13 billion of wealth in a day drew barely a yawn.

Humans absolutely amaze me in their adaptability to change. And the faster the change comes, the more ably we adapt. Nowhere else in human existence is that more evident than in the world of business or politics. Just look to the trash heap of history and you will find terms like “too big to fail”, “war to end all wars” or “I am not a crook.” All seemed plausible when they were uttered in pure, unadulterated folly.

Cautionary Tale

Back to my client project, as I reviewed the terms of his contract and compared it to my notes from many hours of back and forth negotiations with a fair but tough customer- to- be, I caught myself reading and re-reading a clause I had passed by without a second thought until then.

Force majeure. Force ma-what? It is in practically every contract but gets about as much notice as the phrase “for good and valuable consideration…” That is for the lawyers to figure out. Just show me the numbers. Epidemics or acts of God are no concern of ours, right?

Wrong!

Not anymore ladies and gentlemen. Our world has changed that much in just six months…not 55 years. Rereading my client’s contract, I realized that force majeure had become relevant to my clients almost overnight.

We ought to pay close attention to the change happening before our very eyes and be ready to pivot, adapt, adjust, reimagine and do just about anything but deny its inevitability.

Today, as I look both back and ahead, I do so with renewed perspective and vigilance – both in my personal dealings as well as those I undertake on behalf of my clients. You may wish to do likewise. As I suggested previously, take this with a grain of salt but do not take it for granted.

Here are my takeaways from this experience. Learn from the past. Always keep evolving. Remain curious.  Trust but verify. Never let your intellectual guard down. Embrace change and the opportunities in inevitably exposes. And never ever assume you have seen everything.

At the 2GO Group of companies (CFOS2GO, CROS2GO, CIOS2GO, COOS2GO, CHRO2GO and Accountants2GO) we practice more than just theory because in times such as these we know that it is experience that counts before theory can be applied.

We are a diverse group of professionals who have been there and done that and whose clients can always expect sound and levelheaded advice even in these most turbulent of times.

 


 

Joe Markunas, CPA is a Partner at CFOS2GO and leads their Life Sciences and Healthcare practice group which is dedicated to serving the accounting, financial, consulting as well as interim and permanent staffing needs for companies in these and other industries. Additionally, Joe has conducted successful accounting and consulting engagements for clients in industries as diverse as manufacturing, ecommerce, agri-business and import/export to name a few.

Leave a Reply

Your email address will not be published. Required fields are marked *