Practical And Successful Solutions To
Business And Intellectual Property Legal Issues

When is it appropriate to invoke a force majeure clause?

On Behalf of | Jun 27, 2022 | Contracts |

Many businesses in Tampa, Florida, and across the country continue to face uphill challenges to their stability and long-term viability as the recent recession has bled into looming inflationary woes. Brick and mortar retailers, restaurant proprietors and service, entertainment and transportation industries must all take measures that will manage risk if there are future economic upheavals.

As companies start up or adjust to a fluid economic climate, it can make sense for business owners to consider their options or reevaluate current contracts that will protect them from unforeseen events. Getting an experienced legal perspective can help keep the enterprise stable as it weathers future challenges.

What is a force majeure clause?

When a business is unable to fulfill an order or complete a contract, whether due to a commodities shortage, the loss of a supplier, or a reduction in workforce, the typical remedy by the injured party is a breach of contract suit. A force majeure or “act of God” clause in the contract, however, can mitigate the effect of such a claim if it lists the conditions under which the contract could be null.

There are several factors that the courts must address in deciding if the application of the force majeure is justifiable under the circumstances, including:

  • The list of specific unforeseen events or catastrophes that would invoke a force majeure.
  • The conditions under which the event could be foreseen.
  • Whether non-performance could be the direct result of a force majeure.

Other protections against breach of contract claims

It is also possible for businesses to legally cancel a contract without a force majeure clause. Common law remedies include the doctrines of impracticability and frustration of purpose if contractual obligations are unreasonably harmful or expensive, or rendered impossible by unforeseen events. The courts, however, tend to narrowly interpret such claims, so their success depends on the jurisdiction.

Under the Uniform Commercial Code, the doctrine of commercial impracticability will allow for nonperformance under contract if there has been contingency that the parties assumed would or could not occur. This can cover a seller’s delivery delays or non-delivery, or the fair and reasonable allocation of manufacture or sale of products to clients and timely notification of delays by a seller who entered into a contract in good faith.