March 27, 2020

What is a force majeure? | Contracts 101

We’ve been hearing a strange new term a lot these days: “force majeure.” It is French. It literally translates to "superior force." Sometimes it is referred to as “act of God.”

What is "force majeure"? It is a provision in a contract that excuses an obligation. 

But first, what is a contract?

To have a legally binding contract you need an Offer and an acceptance of the Offer – (Offer: “If you do this, I will do that.” Acceptance: “Okay.”). 

Then, you need Consideration  -- both parties must give and receive something of benefit . For example, two professionals agree to payment in trade  (“I life coach you; you give me yoga lessons.”  “Deal.” That is an oral contract.

Put that contract into writing and add a force majeure clause:

Neither party shall be considered in breach of this Contract to the extent that performance of their respective obligations  is prevented by an Event of Force Majeure

Clauses like that often cover natural disasters like hurricanes, floods, earthquakes, and weather disturbances.  Other covered events may include war, terrorism or threats of terrorism, civil disorder, labor strikes or disruptions, fire, and sometimes disease or medical epidemics or outbreaks. But it must say so in the clause.

Courts tend to interpret force majeure clauses  to cover the events listed and events similar to those listed will be covered.  For example, while acts of war might be a specified force majeure event, it does not necessarily follow that a court would also excuse a party's performance based on "threats" of war. 

This is important:  There must be a specific Force Majeure type of clause in the contract to be able to use it as an excuse not to live up to your bargain. Otherwise, you will have to argue something else like “impossibility of performance.” 

For example: in the ORAL contract between the life coach and the yoga instructor, let’s say that a hurricane is predicted to occur and the yoga instructor wants to come to the coach’s home. But the coach refuses to let her come over. But a month later the coach sues the yoga instructor for breaching the contract. Will the instructor successfully argue force majeure because of the hurricane?

Answer: NO. Why: there is no force majeure provision in their ORAL agreement. But the instructor will successfully defend on the theory that the coach prevented her from performing her obligation.

There you have it: Force Majeure in a nutshell. Au revoir!

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