Do ‘Force Majeure’ Clauses Include a Pandemic?

April 14, 2020

The force majeure provision—or the “Act of God” clause—allows a person or business to get out of a contract due to an unpredictable “superior force.” Some consumers are wondering if a global pandemic qualifies for that.

The term refers to a “force outside the control of a party,” and a growing number of people are asking whether the COVID-19 pandemic fits the bill or if they should include it in their future contracts. However, there isn’t much legal precedent to draw from that gives the industry a definitive answer.

Can a client cite “force majeure” in their contract? “The answer depends on the specific contract language, local law, and the causal connection between the pandemic and the parties’ ability to perform their contractual obligations,” the American Bar Association notes at its website.

Force majeure provisions can be found in several types of real estate documents, such as loan commitments, leases, property management agreements, construction contracts, development agreements, and sometimes purchase and sale agreements, according to Mayer Brown, a global law firm. 

“You’re seeing a lot of activity on the [commercial] leasing front now with the argument of force majeure,” Jack Fersko, co-chair of the real estate department at Greenbaum, Rowe, Smith & Davis LLP in New Jersey, told realtor.com®.

To cite the force majeure clause, one or both parties must prove an outside powerful source is preventing them from performing a service listed in the contract. Economic hardship is not reason to invoke it, the legal experts quoted by realtor.com® say.

Contracts that include a force majeure clause typically identify specific areas that allow the party to back out of a deal without penalty. These events in contracts often include the following, according to an article at realtor.com®: “Acts of God” (severe weather, floods, earthquakes, hurricanes, fires, etc.); acts of war and terrorism; acts of government authorities; strikes or labor disputes; and an inability to secure materials.

“Force majeure clauses are all written differently,” Susan Goodman, a contract attorney in Denver, told realtor.com®. “Most force majeures after 9/11 added terrorism to the clauses. It was never in it before because nobody really thought of it. … I think pandemics and epidemics are going to be added to every force majeure clause. Attorneys are already advising their clients to do that.”

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