Contract Primer – What is Force Majeure and why is it important?

Many contracts contain a clause titled force majeure. This clause excuses a party from having to presently perform or provide the agreed upon goods or services. There is no one definition of this concept so it is necessary to review the specific language in the contract. However, a force majeure event is also thought of as an act of God – an unforeseen or unexpected event. The common thread is inability to perform due to no fault of your own. A typical force majeure clause will contain a laundry list of triggering events, such as: strike, lockout, act of God, war, fire, flood, compliance with a governmental order or similar causes outside of a party’s control. If a force majeure event occurs, then a party’s performance may be delayed or excused (in whole or in part) – based on the situation. But, courts have ruled that a party’s performance is not to be excused merely because performance will be difficult, burdensome, or economically disadvantageous.

If your contract does not contain a force majeure clause, you may still have the ability to delay or excuse performance under a contract. The common law recognizes that performance under a contract may be delayed or excused due to impossibility, commercial impracticability, or frustration of purpose. Impossibility is when your ability to perform has been destroyed.

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In order to be commercially impracticable, the event is to be unforeseen and not caused by the party expected to perform. A frustration of purpose is a situation where an unforeseen event occurs and, due to such unforeseen event, the party’s principal purpose for entering into the contract has been frustrated. Again, if there are alternative means to perform or if performance has become more expensive, then a party will most likely not be excused from performing.

The coronavirus has been declared to be a pandemic by the World Health Organization and, closer to home, the State of Ohio has issued numerous public orders closing all non-essential businesses and for citizens to shelter at home. It will be necessary for you to review your contract in order to determine if the coronavirus pandemic will be considered to be a force majeure event or if performance is impossible, impractical, or if the purpose of the contract has been frustrated.

So, your next step should be to pull out the contract at-issue from the filing cabinet (paper or digital) in order to determine if a force majeure event has occurred or if performance is impossible, impractical, or frustrated. If yes, then you will have to provide notice to the other contracting party that due to the force majeure event performance will be delayed or impossible due to the force majeure event. You will also want to document all of the steps or actions that you have taken in order to secure alternative means of performance. And, you will want to document all of the various impacts that the force majeure event has had on your business – timing of the event, impacted facilities, potential length of delay, etc. If you have any questions about this topic, do not hesitate to contact legal counsel to further discuss these situations.

Do you have a question related to your business contracts and force majeure?

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Chris Corpus

Founding Partner at Corpus Law Inc

This article does not provide legal advice or create an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. of Corpus Law Inc at 216-973-2475. Copyright Christopher A. Corpus 2024.