What is a Force Majeure Clause?
A force majeure clause is a contractual provision excusing one or both parties from obligations when there are circumstances beyond their control, and when these circumstances make executing the obligations in the contract impractical or impossible.
The spread of coronavirus (COVID-19) and fear of exposure is causing citizens around the globe to make adjustments to their lifestyle. The government has implemented executive orders for citizens to self-quarantine to slow the spread of the virus, which are causing businesses to shut down and reducing their productivity. The government has also ordered certain non-essential businesses to shut down completely. At this time, businesses are determining if they are obligated to perform under their contracts, or whether they can invoke force majeure clauses to excuse their performance temporarily, or permanently.
Force Majeure Events Include:
acts of God, such as severe acts of nature or weather events including floods, fires, earthquakes, hurricanes, or explosions;
war, acts of terrorism, and epidemics;
acts of governmental authorities such as expropriation, condemnation, and changes in laws and regulations;
strikes and labor disputes; and
certain accidents. Economic hardship typically is not enough to qualify as a force majeure event on its own.
Florida’s Specific Requirements for Force Majeure Clauses:
Florida law states that a party seeking to invoke a force majeure clause must show that the force majeure event was beyond their control and was unknown to them. The event must have been unpreventable and not the fault of the party requesting the force majeure clause to be invoked. The party wanting to invoke a force majeure clause may have to give the other party notice, regardless of whether it was stated in the contract.
Because the coronavirus is an unforeseen event, the party wishing to invoke a force majeure clause may have a strong argument unless the contract was entered into after the outbreak.
What if My Contract Does Not Contain a Force Majeure Clause?
If your contract does not contain a force majeure clause, there may be options available to you. The Uniform Commercial Code (UCC) provides that a seller is excused from performing under a contract when “performance as agreed is not possible due to the occurrence of a contingency. With the United States in a national state of emergency and under a government implemented lockdown, it would be hard to argue that achieving what is most contracts, will be impossible.”
COVID-19 is having a significant and harmful impact on businesses all over the United States. Businesses seeking to invoke a force majeure clause should speak with their attorney to consider the language of their contract and the law to determine their likelihood of success.
Paul J. Burkhart
If you entered into a contract and seek to invoke a force majeure clause, please contact Paul J. Burkhart. Paul J. Burkhart is an experienced business attorney who can draft an indemnity agreement and help both parties understand what it covers.
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