Force majeure is a French term meaning “superior force.” It is a principle of contract law that excuses a breach of the contract by one of the parties when that breach is caused by some extreme, unexpected, unforeseeable, or unavoidable circumstance beyond the contemplation or control of the party that has asserted the defense. A force majeure clause can be a few sentences or a lengthy paragraph, and it may go by different names. Until recently, these clauses received little attention. That is no longer the case.
A force majeure clause will not allow a party to escape its contractual obligations simply because unexpected circumstances have made performance of the contract less profitable or more difficult. Instead, performance must be rendered “impracticable” or “untenable” – essentially, outright impossible. Force majeure clauses are narrowly construed and narrowly applied by the courts.
A typical force majeure clause may cite such things as acts of God, floods, fires, earthquakes, wars, terrorist acts, riots, government orders and strikes as defenses to nonperformance. As with all contractual provisions, the clause is negotiable by the parties and needs to be tailored to reflect the transaction at hand.
Many states, including Michigan, have mandated the shutdown of all businesses deemed nonessential. The trickle-down impact on your contractual obligations may ultimately be determined by whether your contract contains a force majeure clause, and, if so, what it says. Would the mandated shutdown of your business qualify as an unforeseen circumstance under a force majeure clause? Probably. But, the extent to which the circumstance justifies your nonperformance will depend on the language in your contract.
Not sure whether your contract has a force majeure clause or, if so, what it means? We can help. Contact us at email@example.com or (248) 477-6300.