Don’t make the mistake of putting a Force Majeure Clause in your contract, without experienced legal assistance. So many people simply throw a template clause at the end of their contracts. But when disaster strikes, they may find themselves in trouble if the clause wasn’t negotiated well enough.
In this guide, we’ll explain why and how to put a Force Majeure clause in your contract properly:
Table of Contents
What Is Force Majeure?
Force Majeure is a common clause used in contracts to free a party from liability or obligations if an unforeseen event or catastrophe occurs. Generally, the clause covers natural disasters but it can also cover human actions. The specific wording of the clause will determine the extent of the clause’s power.What Are the Three Elements of Force Majeure?
For an event to trigger a contract’s force majeure clause, it usually must be:- Unforeseeable
- External to the parties of the contract (i.e., not caused by their actions)
- Powerful enough that a party is unable to perform its contractual obligations any further.
Why You Need a Force Majeure Clause
The term ‘Force Majeure’ comes from the French for ‘great force’. With that in mind, you can see that it covers events that go beyond the powers of the parties in the contract. Imagine for a second that you’re a steel manufacturer and you need to deliver 400 kg of steel to a construction client – they rely on that for their business, so they sign a contract to protect them if you let them down. But, what happens if a hurricane stops your factory from operating? They could sue you for failing to deliver the steel on time. But, if you had a Force Majeure Clause in the contract, you could be free of liability due to this greater power catastrophe. Read Related: How to Defend a Breach of Contract ClaimHow to Put a Force Majeure Clause in Your Contract
Work with a Riverview and St. Petersburg Contract Lawyer
We urge you to try to craft a clause that protects your interests. The best way to do this is with a Riverview and St. Petersburg contract lawyer who will be able to include the following areas of concern: Read Related: Why Should I Get a Corporate Lawyer For My Business in Florida?Ensure It Covers You or Your Business
You should be especially careful that a force majeure clause doesn’t only protect the other party. It’s a common mistake that people assume the clause will protect them, but later find out they’ve been exploited.Ensure Key Obligations Are Included
Make sure you are covered for the key obligations that you could be otherwise liable for. Take the time to consider what areas should be included. Also note that some obligations will likely have to be left uncovered – for example, landlords in real estate contracts should expect to keep their duty to return a security deposit. Your Riverview and St. Petersburg business lawyer can help you determine which areas should be covered when putting a Force Majeure clause in your contract.The Definition of Force Majeure
The definition of ‘Force Majeure’ varies in many business contracts and has a big impact on what happens in a disaster. Generally, the broader the definition is when excusing your business, the better. However, if it’s to protect the other side’s duties you may want it to be as narrow as possible.Broad Clauses
- A far-reaching clause will define Force Majeure as any act, event or disaster that goes beyond the party’s control.
- It wasn’t caused by a party’s negligence or failure to exercise care.
- Be wary of using the catch-all definition, as courts may not enforce vague wording. To avoid this, you can use phrases such as ‘including but not limited to [then list ‘Acts of God’].
Narrow Clauses
- Clauses like ‘unforeseen’ and ‘natural’ can limit a clause’s reach, or you can specifically state that “only” the listed events are covered.
- For example, you can state the non-availability of services, equipment, staff or supplies that could have been anticipated.
What ‘Acts of God’ Should Be Excluded?
When putting a Force Majeure clause in your contract, it can also be wise to exclude a few specific events. For example, there are ‘Acts of God’ where the other party could have mitigated the resulting losses or planned in advance.What About ‘Pacta Sunt Servanda’?
Pacta Sunt Servanda means “agreements must be kept” in Latin. This is one of the oldest parts of international law and agreements. But it rather contradicts Force Majeure by nature. However, as time has progressed we are becoming more and more aware as a society of the external acts of the world from solar flares and pandemics to earthquakes and government shutdowns.What Happens If You Don’t Include Force Majeure?
If the contract you use lacks a force majeure clause, then it will use some default rules under ‘common law’. These include:- Impracticable: The party could be excused from honoring the contract if it is ‘excessively burdensome’ to do so, following an unforeseeable event or guard.
- Frustration of Purpose: When an event changes the nature of a contract, then one’s performance may become worthless – and therefore a lack of performance of an obligation could be excised.
Are Pandemics Considered Force Majeure?
- Many people learned during the COVID-19 pandemic that their Force Majeure clauses didn’t sufficiently cover them.
- However, if a pandemic makes it impossible for a party to perform its obligations then, generally speaking, it should qualify.
- But if it can be proven that the party could still have performed its obligations, then it wouldn’t qualify as Force Majeure – even if it was still very difficult.
- Pandemics may also not be considered unforeseeable anymore, as it could be argued that you’d do everything in your power to mitigate the effects of them.
- You should also be wary that any contracts you’ve signed since 2020 don’t state a pandemic does not apply.
- The best way around this is to ask your Riverview and St. Petersburg business lawyer to include a pandemic clause directly in your contract.
