What is Force Majeure in a Business Contract?
Many business contracts include a clause outlining force majeure. Force majeure refers to an act of God that makes it difficult to carry out the terms of a contract. Based on the specific situation, carrying out the terms of the contract would be inadvisable, impractical, impossible or even illegal. One common example is natural disasters such as earthquakes, tornadoes, hurricanes, floods, landslides and fires. Government actions, wars and terrorist attacks are also included. Even a disease outbreak such as the recent coronavirus, which has led to mandatory quarantines, can cause a business owner to declare force majeure.
In short, a force majeure—which means greater or superior force in French— is an event that is beyond either party’s control. Obviously, nobody can predict an extreme weather event or terrorist attack. However, as a business owner, you still need to plan for the unexpected. That way, when an unforeseen situation happens, you’ll protect yourself and be off the hook for any delays or other issues that can arise.
Courts in various jurisdictions can interpret force majeure differently. It can also be interpreted differently based on the language in the contract or the industry in which the business operates. For the most part, though, an act of God or failure of a third party to perform their duties can cause force majeure to be invoked. Hurricane Katrina is a perfect example. Many businesses devastated by this disaster had to use force majeure for this reason.
Business owners must take great care to include a force majeure provision in their contracts for these reasons. Acts of God do happen, and they want to make sure that the language in the provision specifically applies to their business. Therefore, they should not simply resort to boilerplate language. When reviewing the contract, business owners should carefully read the language that comes before and after any list, as this can alter the scope of a contract. For example, adding the words “or any other emergency situation” narrows the scope to emergencies only, which may not be enough for your unique situation.
Business owners should not only make sure that they are not liable for any delays caused by unforeseen circumstances, but they should also make sure that missed delivery dates and additional costs required to fulfill the terms of the contract are also included. They should also think about situations in which transportation or supply and demand would be affected, as well as any other situations in which it would be difficult to meet deadlines. That way, they can avoid disputes and costly lawsuits.
Seek Legal Help
Sometimes unforeseeable circumstances can affect the terms and conditions of your business contract. Protect yourself and your company by including a force majeure clause in your contract.
Fort Lauderdale business litigation lawyer Edward J. Jennings, P.A. can help you resolve disputes related to inclement weather, disease epidemics, war, government action and other acts beyond your control. To schedule a consultation, call our office at 954-764-4330 or fill out the online form.