What is a Force Majeure Letter?
Contracts include a clause of force majeure to ensure that the parties are not held responsible for natural or unavoidable disasters that disrupt the expected course of events.
In a letter or notice the party seeks to use force majeure to suspend the performance obligations until the event and its impacts stop preventing the performances agreed upon in the contract.
Sometimes a contract can be ended if the impacts continue longer than a set amount of time. When you send out the letter be sure to list specifics on what event, even if obvious, is the reason for the ability to not hold up your end of the contract. Then give a specific time frame for when you will be able to return to normal conditions.
What Does Force Majeure Conditions Mean?
An event that constitutes force majeure is determined on a case-by-case basis based on the relevant contract, applicable law, as well as other facts. The conditions are set out very specifically and typically seen as such in the courts.
Some insurance conditions may be fire, earthquake, flood and epidemics. In these cases a contract could be canceled. If there were to be a flood in a construction zone, the contractors would no longer be able to uphold the timeline set out in their original contract. The variety of losses covered are as diverse as the conditions themselves.
What are Some Force Majeure Examples?
It is important to determine which types of circumstances are covered by the force majeure clause. Typically, provisions cover what are known as “acts of God”, such as hurricanes, floods, earthquakes, and weather disturbances. Also covered could be war, terrorism, and threats of terrorism, civil disorder, labor strikes or disruptions, fire, disease or medical epidemics.
Does Force Majeure Apply to COVID?
Since the World Health Organization declared the Coronavirus pandemic on March 11, any force majeure clause language should apply.
Pandemics that result in the mass closures of public events and schools should not be a close call. It is not a normal risk of doing business and keeping up performances in a contract.
Generally the law requires the mitigation of damages and many businesses can continue to operate in some capacity if not fully.
Does Force Majeure Have to be in a Contract?
For Majeure is a contractual concept, both parties of a contract agree on it and then the courts uphold it. In the absence of a force majeure clause, the parties will have limited recourse.
An example of such remedy is the doctrine of frustration. An unexpected event after the contract has been made causes the parties to be frustrated when they cannot fulfill their obligations. Events outside the control of the parties must have made performance impossible, illegal, or changed the purpose of the contract.
Proving these circumstances has proven very difficult. It is best to have specific contract language before utilizing this part of a contract you may be in.
When Can You Invoke Force Majeure?
To invoke force majeure you should have the specifics from your contract. You should have proof of the event and its impacts making your ability to follow through with performance impossible.
Showing the event was out of your control. Be sure to not invoke this provision in anticipation that things may get worse or you will not be able to hold up the contract in the future.
A force majeure is generally easier to invoke if you are the party providing the goods and services than a party who is only paying, since in most events banks stay up and running.
Deciding when to invoke force majeure should be thought about very carefully, they are usually made in situations that are very unusual, uncommon, or unexpected and stressful.