Force majeure is a French term that literally means “more strength”. It refers to the notion of force majeure, an event for which neither party can be held liable, such as a hurricane or tornado. However, force majeure also includes human acts such as armed conflict. In general, events constituting force majeure must be unforeseeable, external to the contracting parties and unavoidable. These concepts are defined and applied differently depending on the jurisdiction. A case of force majeure can also be the overwhelming force itself, which prevents the execution of a contract. In this case, it is in fact the impossibility or impracticability of the defence. The effect of a force majeure clause that simply excuses any future performance by either party may be a trap if the force majeure event occurs when one party has substantially performed. For example, in a case concerning a contract for a live event at a resort, NetOne, Inc. v. Panache Destination Management, Inc., No. 20-cv-00150-DKW-WRP (D.
Hawaii June 5, 2020), the pandemic was considered a force majeure event that relieves both parties of future performance of the contract. But the party that booked the event had already paid a substantial down payment – that is, it had almost completed its performance – while the station had done some work in preparation for the event, but had not organized an event. The reserving party brought an action for a refund of its deposit. Their claim was rejected because the contract was clear: force majeure freed both parties from future performance, and “nowhere in the force majeure provisions does it say that if the contracts are terminated due to an eligible event, the non-terminating party must refund all deposits made.” (In a subsequent decision, the court upheld its decision and suggested that the reserving party sue for unjust enrichment.) Another case, which gave a broken celebrity complete relief, also led to a seemingly one-sided outcome. In the JN Contemporary Art case discussed above, an auction house agreed to auction off a painting at auction in May 2020, guaranteeing the painting`s owner a minimum sale price of $5 million. The force majeure clause provided that if the auction was postponed due to force majeure, a force majeure clause attributed the risk of loss if performance was hindered, delayed or prevented due to an event that the parties could not have foreseen or controlled. It provides a contractual defence, the scope and effect of which depend on the express terms of a particular contract. These terms could have been negotiated if the parties had taken the time to tailor the clause to their specific transaction, but they are often standard. Another tool for treaty interpretation is to look at the “four corners” of a treaty.
Since the purpose of force majeure is to attribute the risk of the unforeseeable, it is unlikely that a court will find anything that the parties appear to have considered a force majeure event. This justifies paying attention to internal consistency when drafting contracts. For example, in Zhao v. CIEE, Inc., No. 2:20-cv-00240-LEW (D.Me. August 31, 2020), the court noted that while the contract for a study abroad program interrupted by COVID-19 largely provided for refunds in the event of cancellation of the program, it also included a disclaimer, provided that the company is not liable for any loss or damage resulting from, among other things, an “epidemic”. The applicant student did not receive a refund for the cancellation of the program because the epidemic risk was expressly foreseen and attributed in another provision of the contract. For example, the parties in the United States have used the COVID-19 pandemic as force majeure to evade contractual liability by applying the elements of (1) an unforeseeable event beyond the parties` control, and (3) makes performance impossible or impracticable. [10] [unreliable source?] Force majeure is a contractual clause that excludes liability for catastrophic events such as natural disasters and war. Urgent contracts and other sensitive contracts may be designed to limit the protective shield of this clause if a party fails to take reasonable measures (or specific precautions) to prevent or limit the effects of outside interference, either when it becomes probable or when it actually occurs. Force majeure may exempt all or part of the obligations of one or both parties. For example, a strike may prevent the timely delivery of goods, but not the timely payment of the delivered part.
Not so long ago, the force majeure clause risked being dismissed as a long list of potential disasters, each of which is unlikely and embedded in the boilerplate text at the end of a commercial contract. Then came 2020, and force majeure came to the fore as COVID-19 and government shutdowns wreaked havoc on leases and commercial contracts. The disruptions have led to litigation and a growing awareness that we cannot ignore the potential applicability of force majeure to our trade agreements. One silver lining is that ancient case law provides cautionary lessons about what we need to consider when drafting and interpreting force majeure commercial contracts. There are significant obstacles in the way of parties who want to prove impossibility and frustration, so you want to consider a force majeure clause in a commercial contract of any size or complexity. In any jurisdiction, contracts with specific definitions that constitute force majeure – ideally those that address local threats – stand up to closer scrutiny. Even in civil law systems, the application of the term can be severely restricted. There is not much that can be done against unequal bargaining power, such as landlord-friendly force majeure clauses in many commercial leases, but we can all pay more attention to the force majeure clauses presented to us in draft contracts. We should revise the catchphrases, respond to the seemingly one-sided articulations of force majeure rights, and possibly mitigate some of the unfortunate outcomes in other cases discussed in this article. The considerations discussed above may also guide the interpretation of force majeure clauses already contained in contract documents, especially in light of the COVID-19 era, which has so strongly affected trade. As interpreted by the English courts, the term force majeure has a broader meaning than “force majeure” or vis major. The judges agreed that strikes and machine breakdowns, which are not normally included in the vis-major, fall under force majeure.
(However, in the event of machine failure, a negligent maintenance failure may void force majeure claims, since maintenance or lack of maintenance is within the owner`s control.) Adani Gas cites “force majeure” amid Covid-19 containment When drafting or revising a contract, consider the type of breach that an unforeseen and catastrophic event could cause your customer. Next, make sure it`s covered, as your client might be out of luck if this hypothetical future breach doesn`t fall under the contractual description of a breach that force majeure may excuse. Tight or awkward formulation can lead to difficult results. In a recent tuition reimbursement case, a student sued his university, claiming it violated a personal learning contract after COVID-19 pushed the school to turn to remote learning.