Force Majeure Clauses, Explained
With the heavy natural disasters taking place over the last few weeks, this conversation is needed.
And the conversation I’m referring to is Force Majeure — what this contract clause is and how it can help in times of natural disaster or “acts of God.”
That’s what I’m covering in today’s post — along with what to look for in your already-signed contracts if you need relief.
I’m Maria Spear Ollis, aka The Lunar Lawyer, and I’m going to shine some light on force majeure clauses, what they are, and how they can help you get out of a contract when things are out of control.
What is Force Majeure?
A quickie explanation of the used-to-be-overlooked Force Majeure contract clause
Direct translation from French to English: Force Majeure means “superior force.” It usually appears towards the end of a contract (and, because of that, people don’t always pay much attention to it).
The purpose of a Force Majeure clause? To give both “parties” an out if circumstances beyond anyone’s control make the contract basically impossible to fulfill.
How a Force Majeure Clause Can Help
Usually, the clause will list a variety of things that qualify as a “Force Majeure event.” Things like natural disasters, strikes, war, pandemics 👀… you get the picture. Things that nobody has control over.
Then, it will go on to say what happens if a Force Majeure event prevents either side from living up to their end of the bargain.
The Force Majeure event has to actually affect the parties for this to kick in, though. If you’re, let’s say, in a neighboring state, and your power went out for two hours but you’re otherwise unscathed and unaffected, a hurricane probably won’t excuse you from having to deliver whatever you promised to deliver.
But if the contract is for an in-person event, and the venue is wiped out…
Or if you’re obligated to deliver a certain number of products to a wholesale customer, and your workshop is wiped out…
Or you promised to create a certain number of sponsored posts, but your power has been out for days (not to mention your internet)…
…Force Majeure should be available to help you.
What To Look For In A Good Force Majeure Clause
…and how to determine if a Force Majeure clause gets you out of your contract
I said earlier that these clauses tend to be overlooked. They were overlooked waaaay more before the pandemic. But now, there are certain things you want to look out for to see if you’re “excused” from performing your contractual obligations.
What qualifies as a Force Majeure event?
I’ve seen everything from “new pandemic” to “death in the family” listed as acts of God that would qualify as a Force Majeure event. Here is a non-exhaustive list:
illness,
pandemic (or “new pandemic’),
injury,
emergency,
fire,
explosion,
vandalism,
storm, natural disaster, or other similar occurrence,
orders or acts of military or civil authority, or by
national emergencies,
embargoes or blockades,
insurrections,
strikes or other industrial disturbances,
riots,
wars or invasions.
2. What happens, according to the contract, if a Force Majeure event occurs?
Is everyone excused from performance if a qualified Force Majeure event occurs, is there a pivot in the services, or is everything kind of paused and suspended until things return to normal? There’s a difference, which you can see below:
Example 1: Everyone is temporarily relieved from obligations. (A very mutual situation.)
The parties are relieved of any and all obligations under this Agreement during the applicable Force Majeure Event and will resume performance of its obligations under this Agreement as soon as it is reasonably practicable to do so.
Example 2: Everyone walks away and bears their own losses.
If a Force Majeure Event takes place and affects the Event, Host will use diligent efforts to end or circumvent the Force Majeure Event. If, as a result of a Force Majeure occurrence, the Event is cancelled, all parties’ obligations under this Agreement will be fully excused, each party will bear its own losses in connection with the Event and this Agreement, and neither will have claims of any kind for damages or expenses incurred in connection with the Event and/or under this Agreement.
Example 3: The services will pivot. (Taken from a Doula Services Agreement)
Should the Services be adversely impacted because of a Force Majeure Event, Provider will retain the Non-Refundable Retainer and there will be no refunds for payments already received by Provider, but the Services will automatically be provided virtually, and Provider will use all reasonable efforts to work with Client to provide the services through virtual means.
Sometimes, the clause will simply say that neither party will be deemed to be “in breach” of the contract if the breach was caused due to a delay or failure from a force majeure event.
3. What happens to payment if a Force Majeure event occurs?
This will either be in the Force Majeure section itself, or in a termination section. But if the entire agreement is called off (a la Example 3, above), what happens to money that was paid to date, and future payments that need to be made? In Example 3, everyone walks away.
Force Majeure clauses, summary
A well-written, intentional Force Majeure clause can be really helpful in a time of unrest or natural disaster. Hopefully this guide helped you understand what to look for (and what to build in, if your own contract doesn’t speak to Force Majeure!).