Force majeure refers to a common contractual clause that––in essence––divests one or both parties of liability in the face of an extraordinary event that is beyond the control of either. If an event that qualifies as force majeure occurs, one or both parties to the contract may be excused from performing some or all of their obligations as defined in that contract. The party or parties, therefore, cannot be deemed liable for this failure to perform. If you are considering including or signing a force majeure clause, you may find it helpful to discuss your concerns with a skilled attorney who specializes in contract law. For help evaluating your options, consider contacting an Arizona business attorney at Harrison Law, PLLC, by calling (480) 320-2310 to schedule your confidential consultation.
Force Majeure
According to Arizona’s Uniform Terms and Conditions, force majeure is an event outside the affected party’s control that does not occur as a result of that party’s fault or negligence. The occurrences that a party declaring force majeure can cite are extraordinary events that are incapable of being prevented through reasonable diligence. Such events may include any of the following:
- Acts of God
- Acts of a public enemy
- A government authority’s failure or refusal to act
- War
- Riots
- Strikes
- Mobilizations
- Labor disputes
- Lockouts
- Civil disorder
- Fire
- Flood
The Impact and Importance of Force Majeure Clauses
The force majeure clause has become especially important and impactful in the wake of the Covid-19 pandemic. Force majeure clauses are very common in contracts of all kinds, but they often employ boilerplate language that can sometimes be overly broad. Overly broad force majeure clauses may allow parties to the contract to suspend their obligations or even to terminate the contract entirely when any of the following apply:
- Follow through would be impossible
- Follow through would be commercially impracticable
- Follow through would be illegal
- Follow through would be inadvisable
Reconsidering Force Majeure in Response to Covid
According to the American Bar Association, there are lessons to be learned in relation to force majeure clauses in the aftermath of the pandemic. Prior to Covid, force majeure clauses were generally included in business contracts, but they tended not to garner much attention––many were copied and pasted rather than specifically written for the particular contract. The widespread illness and accompanying government-mandated closures of the Covid-19 pandemic plunged many commercial contracts and leases into chaos. These experiences have triggered a re-evaluation of a force majeure clause’s relative importance in the structure of a carefully tailored contract.
Costly, time-consuming, and stressful litigation has been the natural byproduct of this immense disruption, but the business world has learned some valuable lessons in the process. One such lesson is that including a carefully considered and well-crafted force majeure clause in a commercial contract is paramount. A knowledgeable Arizona business attorney from Harrison Law, PLLC, may be able to help evaluate the force majeure clauses in a company’s current and future contracts.
The Elements of a Force Majeure Clause
Each of the following four primary elements must be carefully considered and included in every force majeure clause:
- A list of the kinds of breaches for which the promisor (the party making the promise) can seek excusal
- A list of the kinds of events that qualify as force majeure under the contract
- The definition of the required causal connection between force majeure and contractual obligation for excusal to be allowed
- The definition of an excusal of performance in the context outlined in the clause
The Event Itself
Force majeure clauses tend to provide an overarching definition of force majeure events and often go on to provide a list of examples, which may be exhaustive, brief, or somewhere in the middle. Whether the catchall language comes prior to the list or after, it can play a critical role in how much protection the force majeure clause affords the parties in the event it needs to be invoked.
Simply including a list—regardless of how comprehensive—may not effectively address a truly unforeseen event, such as a pandemic. For example, if the list does not specifically reference a pandemic, the outcome of a related contractual dispute may be far less certain than if the list had been preceded by language like “unanticipated events beyond the control of either party.” Because force majeure events are not only unanticipated but also often unprecedented, it is important that the clause incorporate broad but expressive language capable of addressing events that the parties may not have even considered.
Recent Lessons About Force Majeure
Since early 2020, force majeure clauses have understandably come under scrutiny for the roles they played, or failed to play, in mitigating or exacerbating the overall financial toll of the pandemic. The pressure experienced by businesses of all sizes has prompted a reexamination of force majeure clauses and their potential to defend against unpredictable scenarios. Some of the most essential findings include the following:
- When a clause defines a force majeure event with an open-ended statement like “circumstances beyond either party’s reasonable control,” it helps to bolster enforceability relative to a list of examples alone.
- The law generally finds that pandemics are covered by the inclusion of the phrase “natural disaster” in the force majeure clause.
In other words, even if a force majeure clause does not include a specific reference to a pandemic, it may be covered by catchall language that refers to natural disasters. The most important lesson to be learned, however, is that boilerplate force majeure language copied from the internet may not effectively perform its critical tasks in the face of extraordinary circumstances.
Contact an Experienced Arizona Business Attorney Today
Before the pandemic, contracts generally included force majeure clauses, but many of them had not been reviewed or even given much thought in a very long time. Covid opened our eyes to a great many things, and one is the importance of having a carefully considered and well-written force majeure clause that is up to the task of addressing the truly unforeseen. An Arizona business attorney will recognize the importance of maintaining finely tuned business contracts that include enforceable force majeure clauses. If you are facing contract decisions and wondering what force majeure is and what it means for your business, or if you have other questions related to business contracts, consider contacting an experienced attorney at Harrison Law, PLLC, by calling (480) 320-2310 today to schedule a confidential consultation.
© 2022 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
