A force majeure clause is a type of provision that is often included in a contract. It protects against the risk of liability in the event that an unpreventable circumstance or natural disaster occurs and hinders the contracting parties from fulfilling their legal duties.
The term “force majeure” literally translates to “superior strength” in French. Knowing the translation can make it easier to remember how this clause applies. It also helps to remember the phrase “an act of god” since this clause is usually associated with an event or incident that is beyond a party’s control.
For an event to be covered by a force majeure clause, it must be one that is unforeseeable or unavoidable, and is not the result of one of the contracting parties’ actions. Some events that may qualify for protection under a force majeure clause include:
- War;
- Floods;
- Earthquakes; and
- Hurricanes.
On the other hand, a more common weather condition, such as a blizzard, thunderstorm, or some other foreseeable occurrence, most likely will not be covered by a force majeure clause. In this case, a party may be held liable for ignoring or refusing to perform their contractual duties.
In most instances, a force majeure provision will excuse all parties from executing their contractual duties. However, there are some cases where this clause may only serve to excuse one of the contracting parties. For instance, the parties may decide to include specific terms in a contract for when a force majeure event will excuse both parties. Alternatively, the parties may also negotiate different circumstances as to when the clause may apply to only one of the parties.
As is the case with any type of contract agreement or clause, the terms of a force majeure provision must be drafted in a clear and concise manner. If not, the parties may run the risk of being held liable for an incident that is beyond their control. Therefore, you may want to consult a local business attorney before you insert or sign a contract that contains a force majeure clause.
Lastly, an attorney who has experience in drafting contracts will be able to explain the circumstances in which a particular force majeure clause might be triggered. They can recommend other kinds of contract clauses that you may want to incorporate in your contract.
What Type of Issues Do Force Majeure Clauses Address?
As previously mentioned, force majeure clauses tend to address issues or events that are beyond the control of the contracting parties. Thus, some common types of issues that a force majeure clause may cover include:
- Pandemics: Before COVID-19, a pandemic was not one of the issues that force majeure clauses were traditionally intended to address. Under pandemic conditions, however, some parties have been able to raise the force majeure clause as a defense against a claim, arguing that the pandemic prevented them from performing their contractual duties either altogether or at least not on time.
- For instance, at the height of the pandemic, many manufacturers were unable to keep up with the demand for household items like cleaning supplies and toilet paper. As a result, some manufacturers were able to cite to a force majeure clause in their contract to excuse them from their contractual duties and release them from liability.
- Labor strikes: Labor issues like strikes, riots, collective bargaining disagreements, labor union disputes, and so forth may also qualify as the kinds of events that a force majeure clause may address.
- For example, if factory workers go on strike because they do not want to work during a pandemic and this makes it impossible for a distributor to ship household items to retail stores because the factory workers did not make them yet, then a force majeure clause may possibly cover this conduct.
- War and/or terrorist attacks: Wars, terrorist attacks, and possibly riots are all issues that can be addressed under a force majeure clause. This is because such events are usually not the type that are foreseeable or caused by the parties to a contract.
- For example, if a terrorist attack prevented a distributor from supplying another party, such as a retail store, with materials because the distributor went out of business due to a war, then a force majeure clause would most likely serve to release both parties from performing their contractual duties without fear of liability.
- Extreme weather conditions: As discussed above, certain types of natural disasters may excuse the parties from performing their contractual duties. Some additional examples include wildfires, avalanches, volcanic eruptions, tsunamis, and so on. Note that the particular events that a force majeure clause covers will likely vary based on the jurisdiction as well as the type of contract.
- For example, some insurance policies will not offer coverage for certain weather conditions when a house is located on a beach or is considered ocean front property.
- Cybersecurity attacks: A force majeure clause may even address issues concerning cybersecurity attacks. It should be noted, however, that these cases will be heavily dependent on the facts of each individual case. For instance, if a business implemented every sort of cybersecurity protection available and an attack still happened, then the business might be able to use a force majeure clause as a defense against any claims.
- In contrast, if a business was careless about its cybersecurity protective measures, then the business may not be able to raise this clause as a defense against liability.
- Government regulations: A force majeure clause will normally allow the parties to cancel a contract if the government enacts a law that hinders performance of their contractual obligations. In such cases, the newly passed regulation may make it illegal for the parties to perform their duties under the existing terms of a contract. Therefore, the parties would be released from both the contract and liability because the contract would be deemed invalid based on illegality.
In addition, entities will often include a force majeure clause when they engage in certain business activities, such as those that would make it difficult and/or impossible to fulfill the terms of a contract like some of the examples in the above list. A force majeure clause could then be used to release the company from liability if it was unable to perform its duties under the contract.
On the other hand, if a business intentionally caused or contributed to the event that is preventing the parties from performing their contractual obligations, then a force majeure clause would not shield that business from liability.
Finally, one last thing to keep in mind regarding issues that may be addressed by a force majeure clause is that many events are no longer covered by such provisions. This is often due to technological advances and the ability to predict occurrences that were previously thought to be unpredictable.
Therefore, it is strongly encouraged that contracting parties consult with a lawyer first before they file a claim that involves a force majeure clause. Otherwise, they could be wasting resources on an event that is no longer covered by force majeure provisions under current law. This is especially true for more recent cases that are being filed as a result of the pandemic.
Are Force Majeure Clauses Always Enforceable?
There are no special rules or uniform standards that offer an explicit definition of a force majeure clause in the United States. As such, whether a force majeure clause will be enforceable or not, will mostly be contingent on the terms of a particular contract and the presiding court’s interpretation of its terms.
In most instances, a court will typically enforce a force majeure clause. This is because it comports with standard contract principles in that courts usually defer to the intentions of the parties at the time the contract was formed.
A court will also consider the scope of events that the clause is intended to cover, the nature of the provision in the contract, whether it was meant to cover the event that triggered it, and/or if the event was foreseeable when the contract was formed.
In addition, a court may examine other factors, including if the event was the only phenomenon that prevented a party from performing their contractual obligations, whether the event in question truly prevented the party from completing the contract, and if the breaching party attempted to mitigate the issue by taking all other steps available under the circumstances.
Finally, a court may also review other clauses contained in the contract and consider whether the breaching party fulfilled all other contractual duties except for those that were impeded by the relevant force majeure occurrence.
Are There any Defenses Applicable in a Force Majeure Lawsuit?
Force majeure is a contract defense in and of itself. However, there are some situations that may prevent a party from being able to cite a force majeure clause as a defense. For instance, if a breaching party fails to mitigate the consequences of not fulfilling their contractual duties, then this could be used as a defense in a force majeure lawsuit.
Another defense that could potentially be raised against this type of clause is if state law or the contract does not consider an event to be covered by a force majeure provision. For example, parties who entered into contract agreements either during or after the pandemic, may exclude COVID-19 issues from being protected by such clauses. This could be because a pandemic is now a foreseeable and predictable event.
Another example that has frequently come up in contract cases post pandemic is when a party claims that a force majeure clause protects them from not fulfilling the terms of a contract due to government restrictions and/or stay-at-home orders. For instance, if a party says they were unable to perform contractual obligations because their state government ordered businesses to stay closed, but then the order was lifted, the party may now be liable for failure to perform.
Again, a force majeure clause must explicitly state the conditions that it covers and must comport with the relevant contract laws.
Do Force Majeure Clauses Apply to COVID-19 Pandemic Conditions or Issues?
As previously mentioned, force majeure clauses have been a frequently litigated issue since the COVID-19 pandemic. Many respondents are using force majeure clauses as a defense to argue that the pandemic was not a foreseeable event. As more stay-at-home orders and other pandemic-related restrictions are being lifted, however, the force majeure clause defense will no longer prove sufficient as it once was at the beginning of the pandemic.
At the very least, contracting parties should strive to fulfill what contractual obligations they can under current economic conditions. Such conduct will demonstrate that the parties attempted to mitigate any damages in good faith.
In addition, the now predictable nature of a pandemic has led to many parties amending agreements or creating new contracts that contain a specific provision that explains what the parties should do in the event of COVID-19-related issues. Thus, many force majeure clauses are becoming inapplicable to such lawsuits.
Do I Need to Hire an Attorney for Help with Force Majeure Clause Issues?
If you are involved in a dispute over a contract that contains a force majeure clause, then it may be in your best interest to hire a local contract attorney for further legal advice. An experienced contract attorney will be able to review the terms of your contract and can determine whether current contract law will permit you to be released from liability under a force majeure clause.
Your attorney can also help you to either draft a new contract or modify an existing one to ensure that it covers issues related to COVID-19. Your attorney can also advise you of the consequences of breaching your contract and can find out whether there are any other defenses that you can raise against a claim.
In addition, your attorney can assist you in filing a contract lawsuit against another party and will be able to build a solid argument that advocates for either invalidating or enforcing a force majeure clause in a contract depending on the facts of your case. Lastly, your attorney will be able to provide legal representation in court or during arbitration as well.
