During our last exercise with ME2603 we discussed responsibility and profit distribution in a business.
What happens to a business when it is affected by “the will of God”; Force Majeure?
First off, what is the will of God? The best translation I can come up with is something that is out of our control. It is an independent scenario, where no one can be blamed for the consequences. This could be a hurricane, snowstorm, earthquake or some other large, independent and in some sense unpredictable event.
An example:
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I have purchased a train ticket bound south from SJ (swedish railways) for this christmas. In SJ’s purchasing conditions it is stated that if a train is delayed by 30 min when arriving, then I am eligible for a 50 % refund. If it is over 60 min late, 100 % refund. But this is also dependent of force majeure.
Sadly, someone jumps in front of a train at T-centralen, 5 min before my departure and there is a pile-up; my train can’t leave.
In the end, my train is delayed by 65 min, but SJ claims that I am not eligible for a refund due to the situation being force majeure; they could not have prevented this.
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The scenario presented in the exercise was that a friend of mine took care of my business for a day, there was a storm, everything was destroyed and now I have a business I can’t make any money from. Also, I am probably knee-deep in debt because I have invested in inventory and machines.
This storm was so nasty, that there was nothing that my friend could do to prevent it causing damage to my business. Should he be held responsible for this? Would the outcome have been different if it was I in the store that day and not my friend? I don’t think that it would.
Lets assume that there is a low probability for storms like this, but that I have established my business in an area where this is known to happen. If this was the case, then shouldn’t I have included this in my risk analysis prior to starting my business and prior to setting the price on my orange juice?
It would mean that I already get paid for this low probability risk each time I sell a cup of orange juice, and therefore I shouldn’t hold my friend accountable for the damage that was caused to my business when I was out during the day.
What could be discussed is whether my friend should be held responsible for the damage or not, if he could have prevented it. How about this:
My friend closes the store for the day because I am busy elsewhere. He leaves a window open, by mistake of course, and it rains all night. When I open up the store the next day, I find that my floor is water-damaged and I will need to close the store for the next 2 weeks to get the issue taken care of. The loss of profit is $1000 and the reparation will cost $1500.
Lets assume that the reparation isn’t covered by insurance, because they claim it is my business’ fault (“drulle” in Swedish?). Should I hold my friend responsible and let him pay for 2 weeks lost profits and the costs of reparation? Should he be accountable for the loss of profit, only, or perhaps the reparation?
Please, if you have any thoughts about this, write in the comment section below!
/Ludwig Widén