IT TAKES AN ACT OF GOD
Attorneys drafted force majeure clauses into contracts on the off-chance the parties could not fully perform a contract due to reasons specified in the clause. Until recently, force majeure clauses were overlooked and rarely invoked to cancel or suspend the performance of a contract. As with every other aspect of our lives, this changed, and similarly to how the pandemic spread like wildfire, the invocation of force majeure clauses to cancel or suspend the performance of a contract began spreading across the corporate world like wildfire.
Force majeure clauses are designed and drafted to excuse or suspend both parties from their respective performances of a contract under a certain set of limited circumstances. Because contracts are generally drafted to ensure the enforceability of its performance, courts have historically construed force majeure clauses rather narrowly.
Prior to COVID-19, most force majeure clauses did not include epidemics and pandemics in the boilerplate language of a force majeure clause.
An example of a boilerplate force majeure clause pre-COVID would hold that,
Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement to the extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affected party including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other party.1
The “catchall” in properly drafted force majeure clauses is the “Act of God” provision.
When the pandemic began to spread like wild fire, we saw that supply chains were being disrupted, people were unable to go into work, and it became unsafe to do things that we wouldn’t have given a second thought to doing less than one year ago; which brings me to the crux of this blog. Is a pandemic an Act of God? And, if so, can a party suspend or cancel the performance of a contract by invoking this provision?
To properly invoke the force majeure clause, it must be drafted in such a way that would allow the clause to be reasonably construed to include pandemics. Many scholars believe that although case law is scant when it comes to interpreting a pandemic as an Act of God, it is reasonable to construe a pandemic as an Act of God, and as such able to excuse the performance of a contract drafted prior to COVID-19.2 However, the Act of God language must be included in the force majeure clause to invoke the catchall provision.
Even then, if a contract contains the Act of God language in a force majeure clause, it is not guaranteed that a party can invoke it to cancel or suspend its performance of a contract. The party wishing to cancel or suspend the performance of a contract must also show that despite the Act of God, the party still tried to perform its contractual duties.
Furthermore, to properly cancel or suspend the performance of the contract by invoking the clause, the party invoking it must demonstrate that the Act of God actually impacts its performance of the contract.3 That is to say, a party may not simply invoke an Act of God provision to relieve the party of its contractual duties; the party must shoulder its burden to demonstrate that there is a link between the Act of God and that party’s ability to perform the contract.
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3Beardslee v. Inflection Energy, LLC, 798 F.3d 90, 93 (2d Cir. 2015)
VW Contributor: Leslie E. Mueller
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