When Does a Force Majeure Clause Apply?

AdobeStock_327744070-300x200Force majeure is an important protection for businesses entering into any contract. Especially during the dramatic and unpredictable consequences of the coronavirus pandemic, business owners are wise to use and enforce force majeure clauses whenever possible. An experienced business lawyer can help you draft and use this protection properly. An attorney can also help you deal with a vendor or client who is attempting to improperly use a force majeure clause to get out of fulfilling contractual obligations.

What is a Force Majeure Clause?

Force majeure is a French term that translates to “superior force.” In contracts, it is used to address what will happen in the event of unforeseen circumstances that are not caused by either party. A force majeure clause can address specific events (like wars, strikes, and riots) or general categories (such as “acts of god”). When such a clause is written and enforced properly, it can excuse both parties’ obligations under the contract.

In many cases, it may not be clear whether a force majeure clause applies. Consider the example of war. What if war-like conditions have impeded production, but no government has officially declared war in the impacted area? If the parties cannot agree whether force majeure applies, they might have to take their dispute to court. Courts look at several different factors to determine whether force majeure applies. This includes:

  • Specific evidence to establish the force majeure event was unforeseeable;
  • proof that the force majeure event being relied upon was the cause of the party’s non-performance of its contractual obligations; and
  • evidence that the impact of the force majeure was so severe that the contractual obligations are incapable of being performed.

What To Do If a Force Majeure Clause Does Not Apply to Your Contract

It is usually not possible to anticipate every possible scenario that could occur to impede a contract – especially if it is a situation that has not happened in our lifetime. This is the case with many contracts that are now being examined in light of the coronavirus pandemic. A global outbreak of a deadly disease has not happened on the current scale since 1918. Business owners have not anticipated this, so few – if any – contracts address the specific circumstance of a global pandemic.

If your contract does not have a force majeure clause, or if your force majeure clause does not apply, you still have legal options. In many cases, it may be possible to negotiate changes to the original contract. The delivery date could be extended, or the order reduced. Other terms can be modified as necessary. Business owners understand that COVID-19 has changed our world. Many will be willing to negotiate changes in order to keep their business producing as much as possible.

Experienced, Aggressive Business Lawyers to Protect Your Contractual Rights

The skilled business lawyers at Structure Law Group have years of experience in drafting, negotiating, and enforcing business contracts. They can help you understand your contractual rights and obligations in light of the unprecedented worldwide problems we face. Call (408) 441-7500 or visit our website to schedule a consultation.

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