Sometimes, despite our best efforts, life and the world throw us curve balls that few could have foreseen and are completely beyond your control. Because of this, sometimes a business contract you entered into may become impossible or impractical to perform. This is where a force majeure clause can come in handy.
Force Majeure Clauses
A force majeure clause in a contract is a provision excusing one or both parties to the contract from performing their contractual obligations when circumstance beyond either parties’ control arise which make performance of the contract either impractical or impossible.
What would constitute such circumstances that would trigger a force majeure clause? Well, these clauses themselves usually list qualifying events. For instance, the force majeure clause may include a qualifying event such as an act of God. An act of God may be further defined as include severe weathers such as flooding, earthquakes, hurricanes, and more. Other qualifying events may include war and acts of terrorisms. Epidemics are also often included in force majeure clauses and there are likely many that utilized a contract’s force majeure clause during the Covid-19 pandemic. Other qualifying events may include things like strikes, labor disputes, and governmental acts such as changes in laws and regulations.
Whether or not you can invoke a contract’s force majeure clause requires a fact specific and fact intensive analysis. The precise language of the clause itself must be examined and there must be evidence that the allegedly triggering event was actually unforeseeable. Furthermore, there must be proof that the event was the reason for a party’s failure to uphold their contractual obligations. States also have different laws regarding the enforceability of force majeure clause so be mindful of those, particularly when you are drafting the contract and including the choice of law to apply in the event of a contract dispute.
While you should definitely consider including a force majeure clause in your contracts, be aware that courts are generally hesitant when approaching them and will do so with caution. These clauses are usually narrowly interpreted by courts and are unlikely to apply outside specifically listed circumstances in the clause itself. The good news is that you may still have options available to excuse lack of contract performance outside of a force majeure clause. In fact, the Uniform Commercial Code (UCC) itself has a provision for excuse from contract provision due to impossibility and impracticability. The specific language of the UCC excuses a seller from contract performance when such performance is made impracticable by circumstances not considered when the contract was formed or when such failure to performance is due to an attempt to comply with a governmental regulation or order, regardless of whether the regulation or order later proves to be invalid.
Business Law Attorney
Put strong business contracts in place that protect you and your business in all types of weather. You just never know what life is going to throw your way. At the Kumar Law Firm, we are here to help you plan in the face of an otherwise uncertain future. Contact us today.