Time For a Little Religion – Force Majeure

Written by James Sanders

We have hit a number of the boilerplate provisions over the last few weeks.  As promised, this week we will be looking at the FORCE MAJEURE provision.  Translated from French, it literally means “superior force”.  If are not familiar with this concept, check out a sample provision from www.bloomberglaw.com:

“FORCE MAJEURE. Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to any of the following causes, to the extent beyond its reasonable control: acts of God, accident, riots, war, terrorist act, epidemic, pandemic, quarantine, civil commotion, breakdown of communication facilities, breakdown of web host, breakdown of internet service provider, natural catastrophes, governmental acts or omissions, changes in laws or regulations, national strikes, fire, explosion, generalized lack of availability of raw materials or energy.

For the avoidance of doubt, Force Majeure shall not include (a) financial distress nor the inability of either party to make a profit or avoid a financial loss, (b) changes in market prices or conditions, or (c) a party’s financial inability to perform its obligations hereunder.”

Ok, if your eyes aren’t crossed or you haven’t fallen asleep, you are probably saying:  What does this mean?  In layman’s terms, everything described in the first paragraph are reasons that a party could assert for not fulfilling their contractual obligation (e.g. a hurricane hits the Gulf of America and a refinery had to shut down).  Everything listed in the second paragraph are the exclusions. 

You may not be aware of it, but these types of clauses are in a lot more of your agreements than you think.  I can assure you that larger organizations and entities constantly review and fine tune these provisions and will be rolling out revised versions in your next renewal.  I would even suggest that some of the terms in paragraph one may end up in paragraph two (think “epidemic, pandemic and quarantine” or possibly even a tariff related reference).    

If you have a concern or question about this type of provision, it might be time to review your insurance coverages, contracts or any other formal agreements with your professional team of advisors.  You never know when God will decide to act, we have a repeat of 2020 or a country stops supplying us due to a trade dispute. 

Next week, we will wrap up this series with the remainder of the boilerplate clauses.