Simply adding “pandemics” or “Covid-19” to force majeure clauses is lazy lawyering. Courts analyze force majeure clauses according to their specific language. Ironically, this is one area where attorneys are failing to put in the time—billable time!—to ensure their clients are properly advised.
The following are issues that are commonly overlooked:
How does climate change impact your business? Many force majeure provisions excuse performance for “unusually severe weather” or “abnormal weather conditions”. The time periods for data analyses to determine whether conditions are “normal” or “abnormal” are not what they were ten years ago. Likewise, in light of technological advancements, it is unclear whether observation points or specific contract sites will provide the source material to make these determinations.
Many other recent developments such as air quality issues from forest fires hundreds or thousands of miles away may no longer be abnormal events.
These realities should trigger conversations with their insurers and attorneys to discover how climate change directly impacts their day-to-day businesses. Global events such as the savage attacks on Ukraine and Israel cannot be overlooked, too.
Is the event or the effect of the event unforeseeable or uncontrollable? The specific contract or statutory language will answer this question. That being said, companies are expected to proactively mitigate their damages by taking preventative measures from a wide range of foreseeable or controllable events that should be helpful in all circumstances.
What is the appropriate action? Force majeure clauses may contain a variety of verbs to explain how the force majeure will impact performance. Three commonly used verbs require performance (often payment) to be “delayed, interrupted, or prevented” as a direct result of the force majeure. In plain English, performance often needs to be impossible, not more difficult or more expensive. Another example is a recent case in Illinois that concerned a force majeure provision permitting termination of a lease abating the rent.
Does your state have a force majeure statute? Under Arizona law, a “’force majeure’ means an act of G-d or of nature, a superior or overpowering force or an event or effect that cannot reasonably be anticipated or controlled and that prevents access to the sale location for conduct of a sale.” Its neighbor New Mexico defines this term in the oil and gas context very differently. It is as “an act of God or any other cause not reasonably within the control of the supplier.”
Statutory language will either govern or highly influence how a court will interpret a contract. Attorneys should consider directly or indirectly referencing state statutes when it is in their clients’ best interests.
The importance of “force majeure” clauses will only increase in the foreseeable future. Regular review your contracts on a periodic basis in an everchanging and increasingly violent world should be implemented immediately.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, real estate, and other issues. He can be reached at email@example.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.