Unexpected events are now anticipated in business. To avoid contract disputes, agreements should contain force majeure clauses that address extraordinary events.
Force majeure clause
A force majeure clause identifies seriously unusual events that make contract performance impossible. These events have to be beyond the parties’ reasonable control. Contract parties must demonstrate that took reasonable efforts to address the circumstances that made contract fulfillment impossible.
Many contracts contain a force majeure catch-all term that refers to events outside a party’s control without addressing specific circumstances. But commercial contracts often contain force majeure clauses containing a list of significant unforeseeable events that excuse contract performance such as:
- War
- Riots
- Crime or property theft
- Epidemics and pandemics
- Terrorism
- Death
- Labor strikes
- Natural disasters such as blizzards, earthquakes or hurricanes
- “Acts of god”
These and other defined unforeseeable events can also allow parties to delay their obligations for a specified time, revise the contract terms or agree on its cancellation. Force majeure provisions and qualifying events vary and pertain to the type of contract the clause applies to.
If a contract does not contain a force majeure clause, a party may seek non-performance under the common law doctrine of frustration. If this claim applies, the entire contract becomes void, and all contractual obligations are excused.
Exceptions
A force majeure clause usually does not cover events caused by a party or that falls within its reasonable control.
Force major clauses may not cover predicable events which were predictable because of a common occurrence or where the parties should have had contingent planning because of the event’s likelihood. Rain on the day of a concert, for example, may be ineligible because it is a common occurrence.
Events caused by a party through their own actions do not qualify for force majeure. Also, a contract may exclude events excusing non-performance in their force majeure clauses.
Inclusion of force majeure clauses and other terms in contracts can help prevent legal disputes. If a lawsuit is filed, effective contract terms often help protect a party’s rights.