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Missile Strike and Nuclear War? Contract Considerations in 2018

C all it naiveté or a luxury of modern times, but client safety is not traditionally regarded as a top-of-mind consideration during contract negotiations. Normal safety concerns include provisions dictating how a service provider behaves while on-site — whether that means following office norms like scanning a badge when entering the campus or wearing closed toe shoes on a factory floor. Safety may also play a role in client decisions like transportation, lodging, and on-the-ground assistance (e.g., local language facilitators, drivers, etc.). However, these are not usually large issues or negotiation points, and the threat of military action is certainly not something many US lawyers address when drafting service delivery agreements for their clients. Fast forward to 2018 and, unfortunately, that calculus must change; real military threats around the world must be a contractual consideration in some cases. Take, for example, threats of North Korean missile attacks and the impact they have on companies looking to deliver services on the ground in Asia.

Termination provisions can provide safety and comfort for on-the-ground colleagues

Consider that your client and/or the person they are sending may be genuinely afraid for their safety, or not be comfortable showing up, and that decision may be a last-minute one as situations change. What effect does political climate or threat to personal safety (i.e., "fear") have on the agreement and a party’s ability to deliver? While war and other forms of political instability are always a possibility, the current geopolitical situation suggests that there is a greater urgency today and, for that reason, there are important considerations to account for when drafting termination, force majeure, and related provisions in agreements for delivery in the affected regions.

Consider the following questions: Do you want to be able to terminate the agreement at any time due to a fear or concern of attack, an uprising, a government coup, or similar political instability? Is it fair to expect the parties to put some reasonableness standard on the fear-caused termination? Does it matter if the fear is reasonable or irrational? Is it even possible to determine if something as subjective as “fear” is reasonable? If you do decide to include it, what effect does a termination on that basis have on the agreement?

When deciding how to proceed, remember that different sides of a contract may have different perspectives, and the party on the ground in the threatened country (South Korea in this example) may be accustomed to living with the fear of attack from the perceived aggressor (here, North Korea). This may impact their flexibility on termination and refund. Desensitization on one side, however, does not materially impact the real fear and concern on the other side.

Consider the following language as a starting point for the discussion:

“The parties acknowledge and agree that, due to regional and geopolitical uncertainties, holding the event may not be possible or acceptable to *Company* or *Speaker*. Accordingly, the parties agree that *Company* may, in its sole discretion and without penalty, terminate and/or postpone the event should it determine that holding the event is unsafe or ill-advised.”

This addresses the questions in a broad manner and in favor of a company from outside the affected territory. It also starts the conversation from that party’s perspective, while leaving open space for negotiation around issues that the other party may want more specificity about. Obviously, this language is a starting point and add-on provisions can be included. Negotiation can progress from there, and flex points may include (1) best efforts requirements to reschedule once the situation de-escalates; (2) splitting any out-of-pocket and non-cancellable costs (plane tickets, hotels, etc.) and (3) technological delivery options should physical presence in-country be impossible, impractical, or not desirable.

Think twice before sending employees potentially dangerous areas

Further, consider what liability your client may be taking on if they encourage their employee to travel despite their fear. What is the appropriate response if an employee strongly resists traveling to a certain area?

Every employee is going to have a different fear level and risk tolerance. Consider advising your client on how to properly approach this sensitive topic and best practices if a particular employee appears reticent to travel. Advise clients in this situation that this is a serious issue that should be discussed in detail with their HR departments. Also, although not a contract point, be prepared to hire crisis counsel if your company sends a particularly reluctant person to a risky region and that employee gets kidnapped or killed.  

Note that while this article focuses on one example — the current threat from North Korea — these same issues and considerations are transferable to multiple other territories, worldwide. Remember the fear pregnant women had in August 2016 during the Zika scare? Some expectant mothers wouldn’t leave their homes. Consideration of geopolitical issues and threats is a difficult but necessary part of counseling clients in the modern age.

About the Author

Joshua BlankJoshua Blank is associate general counsel and vice president for UBM Americas, a global leader in the live events and conference space. UBM delivers products and services to clients globally.

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