The term force majeure has been in the news a lot lately due to the coronavirus pandemic. Still and unsurprisingly, many startups, small businesses, and individuals are unaware of what that clause refers to.
A force majeure is an event that is typically unforeseen or uncontrollable at the time two parties enter into a contract. A force majeure provision is a “boilerplate” clause in many business contracts that free the contracting parties (or a single party) from their obligations if such an event occurs. The language will typically look something like this:
Force Majeure: Neither party shall be held responsible for delays or non-performance caused by activities or factors beyond its reasonable control, including without limitation, war, weather, strikes, lockouts, fires, acts of God, terrorism, or any other activities or factors beyond its control, whether similar or dissimilar to any of the foregoing. Notwithstanding the foregoing, the affected party shall promptly provide written notice thereof to the other party, which notice shall include a detailed description of the event of force majeure along with the affected party’s best estimate of the length of time such event will delay or prevent performance hereunder.
Some clauses may be broader or more specific than the one above. If your contract has language similar to the paragraph above, you would most likely say that the coronavirus is an “act of God,” or claim that the governments shutting down borders/cities are “other activities..beyond its [your] control.” However, keep in mind that this language obligates you (“Notwithstanding the foregoing, the affected party shall“) to “promptly” provide the other party notice with a “detailed description” of the event and your estimated time of delay.
For questions about force majeure, its impact on your business contracts, or any other business contract provision, contact our firm!