Contract Drafting Series Six: Force Majeure

Contract Drafting Series: Force Majeure Clauses. 

Merriam Webster defines the term Force Majeure as one of two things: (1) superior or irresistible force and (2) an event or effect that cannot be reasonably anticipated or controlled. The term is french and, when translated, literally means superior force. So what exactly is a force majeure clause and what does it do in a contract? 

A force majeure clause is included in contracts when the parties want a way to delay performance of the contract (or parts of the contract) in the event a superior force prevents the parties (or one of them) from being able to perform timely. A force majeure clause excuses one of the party’s performance that otherwise would be due in the event something unpredictable, unforeseeable, or otherwise crazy happens – think of the world shutting down during the COVID pandemic. But here’s the interesting point about force majeure clauses, it may not include events such as a pandemic, unless explicitly included in the clause itself, and it usually only excuses performance until the act of God is over. 

Generally, force majeure clauses apply to “acts of God”, things like hurricanes, tornadoes, severe lightning storms, asteroids, volcanic eruptions, etc. However, the force majeure clause can include man-made events/occurrences such as pandemics, government closures or orders, war, arson, and so on and so forth. 

For example, imagine your business leases a commercial space to operate a retail store. Your rent is $5,000 a month. Then COVID comes along and you are not allowed to operate your store from the commercial space. In fact, the government orders that you cannot even go to your retail store or conduct any business. If your lease agreement does not include a force majeure (or other escape clause) your business is still responsible to pay $5,000 a month for each month that you are not allowed to operate. If, on the other hand, your lease agreement includes a force majeure clause such as the following sample: 

“In the event an act of God or other unforeseeable event outside of the parties control occurs that causes the failure or delay of performance of an obligation neither party shall be responsible to the other for such failure or delay for a period equal to such prevention.” 

Then your payment of rent will be delayed for so long as the force majeure clause has been activated by a qualifying event. 

Force majeure clauses are highly effective and widely used in construction contracts especially when completion of construction is guaranteed to occur on a certain date. If acts of God, like an earthquake, cause the construction to be completely demolished, the construction company is going to wish they had a force majeure clause in their contract with the developer/homeowner/etc. Force Majeure clauses are also widely used in residential and commercial leases and other contracts that are time sensitive. 

Shaunt Oozoonian, Esq.

Oozoonian Law Corporation