Many contracts your business enters into are likely to include a force majeure clause. This clause is commonly referred to as the “Act of God” clause because it protects if a party is unable to perform under the contract due to designated events. Carefully review any force majeure before entering into a contract. Read on to understand key elements of the clause and what to do if you find yourself without force majeure protection.
Elements of a force majeure clause
If your industry is likely to be impacted by any disruption in services, such as natural disasters, strikes, or supply chain disruptions, be sure to have a well-drafted force majeure clause in every contract. Be sure to include:
- Whether the clause will protect one or both parties to the contract;
- Which events trigger the force majeure clause;
- The period of non-performance required to trigger the clause; and
- Whether the clause only applies to total non-performance or allows for partial non-performance.
Work with a lawyer to determine whether a broadly drafted clause or a more narrowly drafted clause is more beneficial to your business. If your business is more likely to be the non-performing party, a broadly drafted clause is more favorable. If you are contracting with a supplier and disruption would be detrimental to your company, try to negotiate for a narrow clause. As an example, language like “transportation industry disruption” would broadly encompass most transportation issues while “closure of a transportation provider” is more narrow.
Enforcing a force majeure clause
If your business is facing disruption of business, work with your lawyer to review relevant contracts and analyze the force majeure clauses. Unless you have negotiated for consistent language, the specifics of the clauses are likely to differ across contracts. If the clause applies, provide notice as detailed in the contract.
If the contract does not include a force majeure clause, there are other options for avoiding non-performance. Talk to your attorney to understand if you can excuse performance based on the theory of the impossibility of performance or frustration of performance. Courts are hesitant to excuse performance, so your case will need to be strong.
If you are facing disruption of service from a supplier or are worried about your own ability to perform, work with a lawyer to analyze the contractual relationship and strength of any force majeure.