Unforeseen events or uncontrollable circumstances lead to situations that one would have never dreamt. As a business businessperson, failing to have measures in place to deal with this can compound the matter. The onset of the COVID-19 crisis has been one such occurrence where people across the globe were forced to act in a way that is opposed to traditional norms. People were locked behind doors with workplaces shifted to the online environment.
With such uncertainties, business organizations were doomed to face serious repercussions. For organizations that recently entered into legal contracts, predicting their future course of action, the occurrence of such an event was a disaster. This is where the idea of a “Force Majeure” comes into play.
What is “Force Majeure”?
Black's Law Dictionary gives a very balanced definition to ‘force majeure’:
“An event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.”
In terms of law or the contractual agreement, the addition of a “force majeure” clause within a legal contract gives both the concerning parties a temporary reprieve, allowing them to deviate from the contractual obligations in the event of a force majeure.
Events Classified As Force Majeure
As mentioned above, situations that aren't under the control of either of the parties is deemed as Force Majeure or the “Act of God Clause”
The most obvious events that fall under the same include:
Instances when the region is hit by natural calamities such as a hurricane or an earthquake or events such as war or terrorist attack, neither of the parties stand the chance to abide by the contract. As a result, there arises a situation when either of them must act in a way that isn't legal as per the contract. However, as the situation is uncertain and they cannot do anything but act the way they are currently doing, the Force Majeure gives them leeway.
Things To Keep In Mind When Drafting Legal Contracts
Creating business contracts isn't something that you do without much thoughtful mind. Each and every clause added must be considered , read, and revised. Similarly,when you are adding a force majeure provision within your legal contracts be very detailed and deliberate.
The following are a few things to keep in mind before finalizing the contract with a force majeure clause.
1. Enumerate all of the events that account for a force majeure event. Depending upon the commercial understanding that both the parties have and also the nature of the contract, specify that the list of events could either be exhaustive or non-exhaustive;
2. Mention the actions that would follow by the parties for invoking the force majeure provision. This can be done by including a notice provision to remind both sides about the clause.
3. Details on the consequences that would follow the force majeure event. It is also important to mention that both parties must take all possible measures to deal with the consequences of the event.
Also, it may be a good idea to seek legal counsel to have a full understanding of the clause, , the possibility of specific events, and the consequences they might have to face.
Force Majeure clause, also known as an “Act of God clause”, is an efficient way to get out of a contract, as and when there occur situations that cannot be anticipated. . However, significant care must be taken when the clause is added within the contract to avoid any discrepancies.
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Yoel Molina, Esq. (AKA “Mo”)
Yoel “Mo” Molina, I am a lifelong resident of Miami, Fl. I am a graduate of Miami Senior High, Class of 1992, Georgia Institute of Technology, B.S. 1997 and University of Maine School of Law, J.D. 2001. I have been practicing law in Miami Since 2001. I am a former training prosecutor in the Miami-Dade State Attorney’s Office. I have experience in jury trials, appeals, and administrative hearings. I have appeared before judges across the State. My experience ranges from civil litigation matters, collection matters, foreclosure, business and corporate, contracts, real estate, leases and employment matters..
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