How to discuss a Force Majeure Provision in a Contract?

By The Law Office of Yoel Molina.
 
Lightning strikes, hurricanes, wildfires, and now pandemics. These tragic occurrences are rightly referred to be "acts of God." A contract's "force majeure" clause, which exempts both parties from completing their obligations, is invoked by the parties in the event of a strike. The phrase is typically included as boilerplate legalese near the bottom of the document, where it is ignored by all parties. But when a catastrophe occurs, the question is: Does this tragedy qualify as an act of God as that term is specified in the contract? The response may be highly depressing, as many people found out following the coronavirus epidemic in 2020.
 
What happens if there is no Force Majeure Clause in your contract?
You will be bound by a few default norms if the contract you negotiate does not have a force majeure clause at all, or if you are working under an oral contract (where you were unable to establish a force majeure understanding), which is a body of law that has been observed for centuries.
Impracticable: If performing your contract would be unduly burdensome as a result of a supervening occurrence that you neither anticipated, caused, nor took precautions against, you may be excused from doing so.
Frustration with a mission: You may be excused from performance when an intervening incident fundamentally alters the character of the contract, rendering your performance useless to the other side.
These guidelines can seem to be ample, yet in actuality, they can be challenging to follow. How taxing must your performance be in order to get excused? Should you have predicted the situation? Regarding the latter, it may be very difficult to assert unpredictability given the terrible predictions made by specialists that the coronavirus may reappear or that another pandemic may replace it. It is far preferable to customize the force majeure provision to work in your favor.
 
Forcefully negotiate these issues. Clause of Majeure:
People in business who negotiate contracts are aware that advantageous terms are generally granted to the side with greater bargaining strength. You'll be in a strong position to draft a clause that safeguards your interests if you're in charge—you have a rare good or provide a special service, for example. On the following fronts, ask your lawyer to defend your interests.
 
Who is protected by the clause?
Most force majeure clauses are reciprocal, allowing both parties to be excused in the event of a divine act. However, it is feasible for the clause to simply protect one party, leaving the other party with nothing more than the aforementioned common law principles of impracticability and irritation.
 
 
Which duties does the clause disallow?
The scope of obligations will vary depending on the contract's issue. For instance, a landlord won't want to waive a tenant's need to pay rent, vacate the property at the conclusion of the lease period, or keep any required insurance in a lease. The landlord's obligation to restore the security deposit, honor any payments made for tenant improvements, and protect any option rights are all things the renter will wish to protect.
 
What does the term "Force Majeure" mean?
One of the most crucial factors is the concept of force majeure. You want the clause to be as inclusive as possible when it releases you from your obligations. On the other hand, when it absolves the obligations of the opposite side, you want it to be narrow.
 
How will you notify one another when making a Force Majeure Claim?
Because it is merely a formality, notice provisions in contracts and leases are frequently ignored, and the duration of some rights may be commodiously long. But it's vital to notify the other party as soon as possible—typically within 24 hours—if any party decides that the force majeure provision is in effect. The claiming party should disclose details, such as how long it anticipates the current situation to last, and should also permit inspection and demand regular, written updates.
 
What must the party making the claim do to reduce damages?
A long-standing common law principle is to do what you can to limit and diminish the harm caused by a contract breach (also known as "mitigating damages"). If there were a way to lessen the harm, you couldn't just watch everything fall apart. Your force majeure provision should require the party asserting the force majeure claim to take all "commercially reasonable means" to mitigate the effects of the force majeure. Although you can't specifically describe every one of these stages, some examples include looking for other business sites (including working from home), locating new suppliers, and so on.
 
What Sort of Relief Flows from the Successful Invoke of the Force Majeure Clause?
Finally, take into account the crucial distinction between a temporary and permanent exemption from the relevant responsibility. The option will frequently be obvious given the terms of your contract, but not always. Do you want the responsibilities of the commercial painter to be forgiven or only postponed—and for how long?—in the event that the contract between you and the painter cannot be carried out because the building is closed as a result of shelter-in-place orders? If the delay persists for an extended period of time, you might also think about making the commitment (like a lease) completely null and void.
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If you have any questions about this article or similar matters, please contact our office, the Law Office of Yoel Molina, P.A., at fd@molawoffice.com or 305-548-5020, option 1