Panic surrounding the coronavirus outbreak has led to many questions surrounding what happens to a contract that was entered into prior to the shutdown in large parts of the world economy. Individuals and corporate entities are busy digging up each contract of concern and searching for what is commonly referred to as force majeure language.
What Is Force Majeure Language In Contract?
Black’s Law Dictionary defines a force majeure risk as one where a business is disrupted due to factor beyond control. A contract will typically include a section that is labeled force majeure and either specifically or generally define what classifies as a force majeure event for the parties to the agreement.
As is always the case when it comes to a contract, the language used within the four corners of the document will more often than not determine whether a party can escape the duties and obligations that would be imposed on it, but for the occurrence of a force majeure event.
An Example Of A Force Majeure Contract Clause.
No party shall be liable or responsible to the other party, nor be deemed to have defaulted under or breached this Contract, for any failure or delay in fulfilling or performing any term of this Contract (except for any obligations to make payments to the other party hereunder), when and to the extent such failure or delay is caused by or results from acts beyond the impacted party’s (“Impacted Party”) control, including, but not limited to, the following force majeure events (“Force Majeure Events”): (a) acts of God; (b) a natural disaster (fires, explosions, earthquakes, hurricane, flooding, storms, explosions, infestations), epidemic, or pandemic; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order or law; (e) actions, embargoes or blockades in effect on or after the date of this Contract; (f) action by any governmental authority; (g) national or regional emergency; (h) strikes, labor stoppages or slowdowns or other industrial disturbances; and (i) shortage of adequate power or transportation facilities. The Impacted Party shall give Notice within 5 days of the Force Majeure Event to the other party, stating the period of time the occurrence is expected to continue. The Impacted Party shall use diligent efforts to end the failure or delay and ensure the effects of such Force Majeure Event are minimized. The Impacted Party shall resume the performance of its obligations as soon as reasonably practicable after the removal of the cause. In the event that the Impacted Party’s failure or delay remains uncured for a period of 10 days following Notice given by it, the other party may thereafter terminate this Contract upon Notice.
Key Force Majeure Contract Language For The Coronavirus Outbreak
Note the words “epidemic” and “pandemic” are included in the sample contract force majeure clause above. One who wishes to delay or terminate the peformance of obligations in a contract based on the coronavirus outbreak is benefitted when the force majeure clause specifically sets forth that an epidemic and/or pandemic qualifies as a force majeure event.
Yet, even the inclusion of words like “epidemic” and “pandemic” may not be specific enough to invoke a force majeure clause in contract during the coronavirus outbreak. One lawyer pointed out that, on March 11, he was dealing with a force majeure clause in a contract where the coronavirus outbreak being declared a pandemic by the CDC is what is needed in order for the party to be released from a contract and that a declaration from the World Health Organization was not sufficient. As he stated, expect the unexpected.
What Can You Do If You Have Force Majeure Questions Surrounding The Coronavirus Outbreak?
The lawyers at Heitner Legal are happy to answer any contract questions you may have, especially if they are related to force majeure clauses in this trying time surrounding the coronavirus outbreak. Initial consultations are provided free of charge.
We have already been answering numerous questions for existing clients and potential new clients who are very concerned about the exhaustive obligations that a contract may contain and do not have a clear appreciation as to whether they can get out of those duties without putting themselves in a position where they have extreme liability. The last thing you want to do is used an untrained eye in reviewing what is commonly very difficult language to comprehend and assess.
Do not just be of the position that third parties will not seek to enforce the terms of a contract. Get some guidance on whether you are in a position to invoke some sort of force majeure language and, in the future, make sure you have a lawyer who understands Contract Law to help you draft, review and revise your contractual agreements.