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Force majeure in business contracts

On Behalf of | Jan 13, 2020 | Business Litigation

When you enter into a business contract, you usually intend to comply. However, occasionally you may fail, and a client might file litigation against you. There may be times when you feel your failure was due to circumstances beyond your control. You might feel it was down to a “force majeure.”

What is force majeure?

Force majeure is when an outside event beyond your control that you could not foresee makes it impossible for you to fulfill your contract. Typically it is used for natural disasters such as earthquakes or hurricanes, or large scale human-made problems such as wars. However, recent events have brought that definition up for debate.

During this last year, you may have been unable to comply with a contract due to the current world situation or restrictions such as lockdowns enforced by the government. Whether this counts as force majeure is uncertain.

To claim force majeure, you typically need to have specified which conditions it can apply to. For example, as a Florida business, you may mention hurricanes. If you live further north at the base of a mountain, you might specify avalanches. The problem with the current situation is that no one saw it coming. So it is unlikely you mentioned it in a force majeure clause.

Courts across the country are currently dealing with various breach of contract cases where one side claims the current situation should qualify as force majeure. So far, there is no definitive opinion across-the-board on whether recent events count or not.

Revisit existing business contracts to check what they do and do not specify under force majeure. Seek help when doing so or when creating new contracts. Being too general could be as bad as being too specific.