Cadden & Fuller LLP Cadden & Fuller LLP

A Client-Focused Approach to Business and Real Estate Law

Force majeure clauses may be a contract escape hatch

On Behalf of | May 6, 2020 | Business Transactions |

Anticipating business contingencies is a prudent part of business planning and contract drafting. But business must also confront unexpected and unavoidable events. To deal with these, force majeure clauses are an important part of commercial business transactions.

Force majeure is a French term which is translated as superior force. It is also a common legal term that identifies a contract clause where a party does not have to comply with the terms of a contract. Compliance may be excused if unavoidable or unpredictable events affect a party’s ability to perform their contractual duties.

Force majeure contract clauses usually contain a specific list of events that allow a party to withdraw from the deal without penalty. These include severe weather, flood, earthquake, fire, epidemics and other Acts of God. Other typical events are act of war or terrorism, strikes or labor disputes, acts of government authorities, inability to obtain materials and other events beyond a party’s reasonable control.

Most business-to-business contracts contain these clauses. Commercial leases and development projects also have been using these. But force majeure clauses are not usually in personal mortgages, apartment leases and home improvement contracts.

This clause may be invoked if a force majeure event prevents a party from meeting the terms of the contract. But a party is usually not excused if it could and should have prepared for the terrible event or disaster. Bankruptcy or other economic reasons are also invalid reasons for being excused.

These clauses also change over time. After 9/11, for example, terrorism was included as force majeure event. Future contracts may have clauses that include a word like pandemic.

An attorney can help draft contracts and provide advice on transactions that meet a party’s needs and anticipates events. They can also assist parties when sudden and unanticipated events occur.