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What does the contract term ‘force majeure’ mean for you?

On Behalf of | Aug 17, 2020 | Dispute Resolution

In these uncertain times, you may be hearing the phrase “force majeure” more frequently than you would have in the past. It is a term in many contracts, but most people do not know precisely what it means.

Force majeure is a French term meaning “superior force.” In contracts, it refers to an extraordinary, unforeseeable event that altogether prevents the contract from being carried out. A force majeure clause limits the parties’ liability or, depending on how it is drafted, cancels the contract altogether.

A force majeure event is essentially one that is completely beyond the parties’ control and is unforeseeable. Or, if the event was foreseeable, it was unavoidable. However, the type of event generally must be affirmatively mentioned in the contract.

Experiencing a force majeure event?

Currently, many companies are claiming that they have experienced a force majeure event. Either the pandemic or the government actions in response to the pandemic have made it very difficult, if not impossible, to fulfill many contracts.

Very difficult, however, is not impossible. If what has happened is that your contract has become difficult or unprofitable to fulfill, you are not experiencing a true force majeure event. Generally, force majeure only applies to situations where it is essentially impossible to comply with the contract’s terms.

After the 2008 economic crash, a number of courts ruled that force majeure did not apply. This is because the events merely made it financially impossible to meet the contracts, not literally impossible.

Do you have a force majeure defense?

If you have been sued for breach of contract, you may very well have a force majeure defense. However, it would have to be specifically listed in your contract and a court would have to find that the pandemic or the governmental response constitutes true force majeure.

If you have not already been sued, however, you may wish to use force majeure as an argument for why you should not be required to fulfill the contract at this time.

This is because courts look more favorably on parties who have been reasonable about resolving the dispute. The other party to your contract may recognize that you are in an impossible situation and grant you some leeway in the performance of the contract. The question of whether you have a true force majeure defense only truly matters once you get to court.

If you are having trouble fulfilling a contract due to the pandemic, have your attorney review the contract to determine if force majeure could be a defense in your case.