Business contracts can be essential to helping ensure business deals go right. They can also be essential in protecting you and your business should things go wrong. Over the past few years, for instance, the pandemic has forced many business dealings to go south, with no fault on the part of the business partners who entered into the contract in the first place. You see, sometimes the unpredictable or unforeseeable happens and makes performance of a contract impossible or impractical. This can occur despite the best efforts of the parties involved. Still, you may be held responsible for the unforeseeable impossibility of contract performance unless you have protected yourself accordingly within the contract itself. This is where a force majeure clause may prove extremely valuable.
What is a Force Majeure Clause?
A force majeure clause is a contract provision excusing one or both parties to the contract from contract performance should certain circumstances arise beyond anyone’s control that make contract performance either impractical or impossible. The force majeure clause can, and often does, include language setting forth what circumstances would trigger the clause’s enforcement. Circumstances may include qualifying events such as:
- Strikes and other labor disputes
- Changes and laws and regulations (as well as other governmental acts of authority)
- Acts of terrorism
- Acts of God (including severe weather patterns)
It is important to note that different states have different laws regulating the enforceability of force majeure clauses. Be sure that your force majeure clause is compatible with the laws of the state within which the contract is to be enforced. Your contract should include a provisions for what state laws apply to the contract and its enforcement, as well as its enforceability.
Should the force majeure clause be invoked, whether the circumstances merit such invocation will be a fact-specific analysis relating to the circumstances surrounding the invocation as well as the contract performance, or lack thereof. Key factors in determining whether the force majeure clause applies can include:
- The specific language used in the clause itself
- Evidence supporting the assertion that the event triggering the force majeure clause was unforeseeable
- Evidence demonstrating the impact of the event on the ability of the party to perform the contract obligations
- Evidence substantiating the link between the event and the resulting failure to perform the contract obligations
Courts have the tendency to narrowly interpret force majeure clauses so as not to unintentionally interfere with a business contract to which the parties voluntarily agreed to. Deference will be given to the language used in the force majeure clause and how the parties chose to phrase the clause’s parameters as well as its applicability and scope.
In the event that it doesn’t look like a force majeure clause will excuse your lack of contract performance, there may still be ways to excuse said lack of performance. After all, impossibility and impracticability of contract performance can be a viable defense against breach of contract. The Uniform Commercial Code (UCC) itself provide that a seller is excused from contract performance if a good faith effort to perform was made, but an unforeseen event that was unanticipated by the parties and made contract performance impracticable.
Business Law Attorneys
The proper drafting of business contracts can be integral to maintaining and developing successful business relationships regardless of what the world throws your way. For help drafting and reviewing your business contracts, you can trust the team at Jones, Gregg, Creehan & Gerace. Contact us today.