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Force Majeure Clauses in Business Contracts

When entering into a business contract, each party assumes some level of risk that things will not work out as expected. Prices may rise, supply chains may be delayed, or the job may not be completed in time. However, some risks may not have been anticipated or seemed so remote as to justify canceling or modifying the agreement. 

A “force majeure” clause in a contract can excuse parties from performing under the terms of the contract. However, when one party tries to get out of a contract by claiming the force majeure provision, the other party often disagrees and expects performance. In a force majeure dispute, it is important to have an experienced business and contract litigation attorney on your side to protect your business and its brand.

Force Majeure Clauses

Force majeure comes from the French for “superior force.” The term refers to forces outside of the control of either party, unavoidable accidents, or extraordinary events. A standard force majeure clause may state that neither party is liable for failure or delay in performance caused by forces beyond their control, including: 

  • Acts of God, 
  • War,
  • Civil unrest,
  • Acts of terrorism,
  • Embargoes,
  • Nuclear catastrophes, 
  • Hurricanes, 
  • Earthquakes, 
  • Natural disasters,
  • Epidemics,
  • Strike, or
  • Riots.

The operative clause of a force majeure provision should spell out the rights and obligations of each party in the event of a force majeure event. In most situations, invoking the force majeure clause has the effect of delaying or suspending performance until the end of the event. 

Force majeure provisions are standard boilerplate in many business contracts, including purchase orders, security agreements, real estate contracts, and sales agreements. However, it may be a necessary clause to include because failure to include force majeure language in a contract may not excuse non-performance, even after an unforeseen event makes it much more difficult to fulfill the terms of the contract. 

What Qualifies as a Force Majeure?

Qualifying force majeure events may make contract performance impracticable, impossible, or illegal. Even though a force majeure clause may indicate what types of eventualities can excuse performance, the parties may not agree on whether an event qualifies as a triggering force majeure. The courts also tend to construe force majeure language and events narrowly. 

Pandemics and COVID-19 Coronavirus

Pandemics, endemics, and acts of government are often included in force majeure clauses. Depending on the type of contract, a major pandemic, like coronavirus (COVID-19), may fall under an unforeseen event that would delay or excuse performance under the contract. 

Major and minor events across Massachusetts and the rest of the world have been canceled or delayed because of public health concerns or government directives. This is leaving a lot of businesses unable to struggling to perform under their contractual obligations. A number of businesses are invoking the force majeure clauses of their contracts after the COVID-19 pandemic. This includes contracts that specifically refer to pandemics and government actions, such as forced shut-down of certain non-essential businesses. Fulfillment obligations have also been frustrated by supply chain interruptions, delivery delays, lack of materials, personnel shortages, and facility closures. 

Hurricanes and Natural Disasters

For businesses in Massachusetts, the most common natural disasters that may qualify as a force majeure include blizzards, ice storms, and hurricanes. Many New Englanders are used to the occasional blizzard or winter storm that leaves businesses shuttered for a day or two. However, more extreme blizzards may result in government action to keep drivers off the road, which can make it impossible to deliver goods on time under the terms of a contract. 

In 2015, a blizzard shut down the Massachusetts Bay Transportation Authority, dropping more than 2 feet of snow in Boston and almost 3 feet of snow in Worcester. Hurricanes, like Hurricane Bob in 1991, can knock out power, destroy buildings, and shut down roads that make it difficult or impracticable for businesses to fulfill the terms of their contracts, requiring businesses to look to their force majeure contract terms.

Invoking Force Majeure Clauses

It may be helpful to give as much notice as possible to the other parties to the contract after an emergency or force majeure event. Failure to give notice may increase damages in a breach of contract claim if the event does not qualify. Giving notice may also allow the other party to mitigate damages. 

It is also important to understand the operative obligations and duties under the contract that follow from invoking force majeure.  

If your business is considering invoking a force majeure clause, talk to your Massachusetts business contract and litigation attorney. Your attorney can evaluate your contract and make sure the event in question is covered by the force majeure provisions. 

Challenging Force Majeure Breaches

Even though natural disasters, government shut-downs, or pandemics may make things difficult, these situations do not always qualify as a force majeure excuse of performance. A business may try and claim “force majeure” to breach a contract in order to get more money for their products. Performance may be more expensive under emergency orders but not impracticable or impossible. Some contracts may not even have a force majeure clause to allow the other party to breach the contract. 

If a business is improperly trying to avoid performance, delay performance, or cancel a contract based on government actions, storms, or coronavirus, talk to your Massachusetts business attorney about your options to enforce performance under the terms of the contract. 

Negotiating Force Majeure Modifications

Even where an event does qualify as a force majeure that would delay performance, the parties may both have an interest in continuing the business relationship in spite of the pandemic, hurricane, or government quarantine. However, instead of relying on the force majeure clause to delay or excuse performance, the parties can negotiate a contract modification or create a new contract agreement that takes into account the current situation. A new contract may provide more clear guidance on the obligations and rights of each party without waiting for the force majeure event to end.  

Termination of Contract After Force Majeure Event

Similar to modifying an existing contract, both parties may decide to terminate a contract by mutual agreement in the event of a force majeure event. The unpredictability about the extent and timeline of a natural disaster or government quarantine may leave parties to a contract in limbo, not knowing when the situation will change. It may be better for both parties to terminate the contract and seek out a new contract based on the latest available information. 

An Experienced Massachusetts Business Attorney 

The Katz Law Group, P.C. has nearly 40 years of experience with business law in Massachusetts and across New England, including representing contract litigation related to force majeure events in Framingham, Worcester, and MarlboroughContact us online today.

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