Force majeure clauses account for unforeseeable events

On Behalf of | Mar 22, 2020 | Commercial and Residential Leases |

Many contracts include force majeure clauses and many that do not should. They are often thought of as “boilerplate” contract language that seems so standard and familiar that many people skip reading it.

Force majeure clauses address situations that render a contract unreasonably hard, if not impossible to fulfill. In Arizona property law, Force majeure “means an act of God or of nature, a superior or overpowering force or an event or effect that cannot reasonably be anticipated or controlled.”

Such clauses often define a list of such events and describe what should happen when they occur.

Business risks do not have to be unreasonable

Business is risky. You may buy or lease factories, offices, storefronts or equipment, agreeing to pay banks, property owners or partners money you hope to make with a successful venture that may not even yet exist.

A force majeure (French for “superior force”) clause lessens some of that risk by making lawsuits, for example, harder if “external” events intervene.

Returning to the text of often-overlooked boilerplate

Parties in existing contracts would be smart to return to them and read them closely to confirm they even exist. If so, what events do they appear to include?

The rules of an Arizona Lottery promotion, for example, lists “viruses, bugs […] fire, flood, earthquake, epidemic, explosion, labor dispute or strike […] riot or civil disturbance […] terrorist threat or activity” and more.

The wording can be hard to fully grasp, more so at the time the parties sat down to sign the contract, long before monumentally unexpected events become realities.

Single words can make big differences

Contracts may also suggest a trigger, such as a government declaration, that must occur before anyone can invoke the force majeure clause. But if the government shuts down a category of businesses, did the disaster itself make contracts impossible to fulfill or did the government? And does this difference matter?

These clauses sometimes release one party from meeting the responsibilities of the contract more easily than the other. For example, one party might be able to release themselves from the contract entirely while the other can defer its fulfillment until later.

In light of events, force majeure clauses can read differently in hindsight, with much in contracts and courts hanging on interpretations of words like “reasonable.” Anyone with questions or concerns about a force majeure clause in a lease or contract may want to consider consulting with a qualified attorney.