“Force majeure” is a term a lot of people have heard in relation to the pandemic. Roughly meaning “superior force,” the term excuses performance of the contract if unforeseeable circumstances make it truly impossible to perform.
A force majeure clause could come in handy for a lot of businesses during this difficult time. This type of clause is also referred to as an “impossibility” or “frustration of purpose” clause. However, it is important to understand the limitations of these clauses.
First, your contract may have to explicitly contain a force majeure clause for one to apply. There is no guarantee a court will read force majeure into a contract or excuse performance of a contract for impossibility generally.
Also, the event you are claiming as force majeure must generally be included in the clause. That is to say, courts will generally not read more into the contract than is specifically there. At the same time, courts have rejected overly broad “boilerplate” language in some cases.
In California, courts have inferred some force majeure events that were not specifically listed in cases where the event was unforeseeable. In any case, the force majeure event must be one that is not specifically excluded in the contract, and that may include pandemics.
Finally, the force majeure event must generally make the contract impossible to perform, not just financially impracticable. Generally, a force majeure event must be beyond the party’s reasonable control and unforeseeable or unavoidable. Simply finding that your costs have gone up exponentially, making the contract unprofitable, is not enough for force majeure.
Is the pandemic a force majeure event?
The pandemic itself may or may not be a force majeure event, but its effects could be. For example, government lockdowns, closed ports and transportation delays could be considered force majeure events even if the pandemic itself were not.
Should you invoke force majeure in your contract?
It is difficult to say whether courts will be inclined to treat the pandemic and its effects as a force majeure event. The party who asks to be excused from performance has the burden of proving that an event has occurred that was unforeseeable and out of the party’s control, and that performance is now impossible, not just impracticable.
If you are unable to show that force majeure has made performance impossible, you could be considered in breach of your contract. A court could order you to perform the contract or to pay monetary damages.