Force Majeure Clauses in Contracts

By Wei Wei Jeang

What does a lawyer do when she views the world through a lawyer lens? Watching the news of the devastating toll brought by Hurricane Helene on the communities of Asheville in North Carolina made me think about force majeure clauses in contracts. I did the same when the Covid pandemic forced everyone to isolate at home, strikes by various unions, and in the wake of other natural disasters and large-scale disruptive events.

The force majeure clause in contracts is a "boilerplate" provision often overlooked but critically important. It addresses unforeseen events beyond the control of the contracting parties that prevent one or both from fulfilling their obligations. This provision gives the parties a tool to manage risk in especially challenging circumstances. These events typically include natural disasters, wars, strikes, or pandemics.

The key function of a force majeure clause is to provide a temporary or permanent reprieve for the party unable to perform due to these extraordinary circumstances. Without this clause, a party failing to meet their contractual obligations could face legal liability, even if the failure was due to uncontrollable events.

During the COVID-19 pandemic, for example, force majeure clauses gained heightened relevance as businesses sought relief from their obligations due to government-imposed lockdowns and supply chain disruptions.

Because courts tend to interpret force majeure clauses narrowly, care should be taken to ensure a comprehensive list of possible disruptive events is included. For example, I now add "epidemic" and "medical outbreaks" to the list even when "pandemic" is already a listed event because they have different definitions. Similarly, I add "threats of terrorism" even when "terrorism" is already listed. Consider the types of massively disruptive natural disaster events that may occur. I make sure that "floods" is on the list in addition to "hurricanes" because floods may result from not just hurricanes. A general catch-all phrase such as "and any other emergent and non-emergent events beyond the parties' control" can be used to cover other unforeseen events.

A well-drafted force majeure clause can save companies from breach of contract liabilities in situations beyond their control. Don't automatically accept the boilerplate provision but carefully take into consideration of all unforeseeable factors that may jeopardize full performance by the parties.

Contact Wei Wei Jeang at wjeang[at]fultonjeang.com to answer your questions about force majeure clauses.