The resurgence of COVID-19 has increased the importance of force majeure clauses in construction contracts. Here are some things to consider for your force majeure clause.
Effect of Force Majeure Clause
Force majeure clauses seek to excuse the nonperformance of a party. A party is no longer obligated to perform when an event expressed in the force majeure clause occurs, and the event is the cause of the party’s inability to perform.
Requirements for Force Majeure Enforcement
Contract Language: The first step in excusing nonperformance is to express the event in language of the clause. It is common to include events like “acts of God” or “causes beyond reasonable control”. Courts typically interpret these clauses narrowly. “Acts of God” may not be interpreted to include the COVID-19 pandemic. The rule of thumb is the more specific the better. Having a list of specific events in a force majeure clause increases the clause’s scope and leaves less room for interpretation.
Best practice is to include actual risks to your business and include catch-all language like “events outside reasonable control, including, without limitation” before your list of events.
Proximate Causation: A party is not excused from performance simply because an enumerated event occurs. The event must be the actual and proximate cause of the inability to perform. For example, enumerating COVID-19 as a force majeure event may not suffice when it is the government’s response to COVID-19 instead of the virus itself that leads to the inability to perform. Again, the more specific your language, the better.
Post Force Majeure
Force majeure clauses can either delay the obligation to perform or entirely terminate the agreement. Either way, the nonperforming party typically must notify the other party of their nonperformance.
If you need help interpreting or writing a force majeure clause, we recommend you contact an experienced construction attorney.
Thanks to Roger Sack for drafting this blog.