Drafting Considerations for Force Majeure Provisions in Contracts

If you are reviewing, drafting or signing a business contract, there’s a good chance that a force majeure provision may be in that contract. That’s a provision that you should know and understand before you either sign a contract with that provision in it, or you draft one that includes a force majeure provision.

What is Force Majeure?

Force majeure provisions are parts of a contract that allow or excuse non performance, and which may completely void the obligations of either party to the contract in the event that an unforeseen and unanticipated triggering event happens.

They are sometimes called “Acts of God:” provisions, but they don’t just include natural events. They can include things like riots, wars, unexpected changes in the law, and, most recently a few years back, unanticipated global pandemics.

Force majeure events can be specifically defined in the agreement (such as with a list of triggering events), or they can just be general, such as “unforeseen or unanticipated events.” The more broad the language, the more events that may legally excuse performance under the agreement.

Out of the Parties’ Control

Usually, force majeure does not protect against foreseeable events. So, for example, a hurricane in Florida may not qualify, because it is commonly expected that every year at least part of the state is under the threat of a hurricane or gets some effects from one.

The events that trigger force majeure must also be something that the parties could not control, plan for, or anticipate.

Watch for Illusory Agreements

Force majeure provisions, if not properly drafted, can end up voiding the entire contract because they may make the contract illusory. This is where one or more parties to a contract aren’t really bound by the contract, and can perform or not perform without consequence. Thus, a force majeure cannot just serve as an “out” for a party to avoid performance under the contract, something that could happen if the force majeure provision is too vague, or broad.

Drafting Force Majeure Provisions

The event that triggers force majeure, should be defined as specifically as possible. For example, in the example of a pandemic, is it the pandemic, or the government shutdowns caused by the pandemic, that cause the force majeure to come into effect? The contract should specifically state these triggering events as specifically as possible so there is less of a chance of litigation over what actually triggers the force majeure.

Force majeure provisions also should specify whether the triggering event completely excuses performance, thus effectively nullifying the contract, or whether it just excuses a delay in the performance of the contractual obligations.

Any party seeking to invoke a force majeure provision, or a party who feels they have been damaged by one, may be under an obligation to mitigate its own damages. Parties must perform their obligations in the contract as much as possible, given the triggering event.

Do you have a dispute involving a business contract? Our West Palm Beach commercial litigation lawyers at Pike & Lustig can help you with your case today.

Source:

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