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What does a ‘force majeure’ clause in a contract do?

On Behalf of | Oct 4, 2021 | Business Law

“Force majeure” has been coming up a great deal during the pandemic. Even as the crisis seems to be waning, supply chain disruptions have made it difficult or impossible to meet some contractual obligations. Some contracts contain a “force majeure” clause that could excuse performance, in some circumstances.

When an unforeseeable calamity makes contract performance impossible

“Force majeure” literally translates to “superior strength,” but it can also be referred to as an “impossibility of performance” clause or an “Act of God” clause. It basically refers to any natural or manmade disaster that makes performance of the contract impossible.

  • The event must be out of the parties’ control
  • The event generally must be unforeseeable
  • If foreseeable, the event must be unavoidable

It’s important to realize that a force majeure clause generally must spell out exactly what it covers. The courts won’t read additional terms into the clause.

So, if you are having trouble performing a contract due to the Coronavirus pandemic, your force majeure clause will only be effective if it specifically mentions pandemics or consequences of the pandemic such as transportation delays, labor shortages or port shutdowns.

It’s also important to understand that performance must be considered impossible, not just impracticable, inadvisable or financially unfeasible. It is not enough that performance of the contract would cost you money or no longer be profitable.

If you have a force majeure clause that does cover the event you’re affected by (e.g. the pandemic) and the event has indeed made performance of the contract impossible, you could be excused from performance of the contract.

Will force majeure clauses be an effective way to deal with situations where the pandemic makes contract performance virtually impossible? We will have to wait and see, as the issue is still making its way through the courts.