Updating Force Majeure Provisions

In light of the COVID-19 pandemic, it may be time to for contract drafters to review and update their force majeure provisions.

The basic function of a force majeure clause is to excuse a party to the contract from liability if some unplanned event occurs that is reasonably outside of the affected party’s control.  A force majeure clause may be as simple as that, or there may be many caveats and contingencies before a party is deemed not to be liable for their nonperformance.

No matter the complexity, a force majeure provision will often list specific events that constitute a “force majeure.”  Common events listed are acts of God, floods, fires, war, and earthquakes; the list may be illustrative or an attempt to be exhaustive.  Additionally, force majeure events may be natural, or they may be caused by man.

Two events that are not often seen in force majeure provisions are “epidemic” and “pandemic.”  In light of what the world has been experiencing, maybe it is time the terms “epidemic” and “pandemic” are specifically included in force majeure provisions more frequently and in a much wider array of contractual relationships.

The COVID-19 pandemic has affected nearly every arms-length relationship on the planet.  From massive global supply chains to engaged couples reserving a wedding venue, the COVID-19 pandemic has either prevented many parties to contracts from performing or has cast many others’ abilities to perform their contractual obligations into a state of uncertainty for the foreseeable future.

A quality of an adept contract drafter is his or her ability to [attempt to] account for all possible outcomes and allocate the risk within the written agreement for the purpose of protecting their client to the best of his or her ability.

While it is not possible or pragmatic to think of every possible scenario that would trigger a force majeure, the addition of two more words in a force majeure provision doesn’t seem too burdensome, especially when weighed against the burden of recent events.

 

Steven J. Enwright is an attorney and partner at Lippitt O’Keefe, PLLC in Birmingham, MI. Steve advises clients in a wide variety of industries on business matters including general corporate counseling, mergers and acquisitions, start-up counseling, venture capital, corporate finance, technology licensing, and a variety of contract law matters.  Contact Steve at senwright@lippittokeefe.com