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What is Force Majeure?
The term “force majeure” is a French term referring to an uncontrollable force or natural disaster that is beyond the control of the operator or state. Ohio law is relatively new to the use of a force majeure clause to excuse underperformance or nonperformance in a contract. The language included in a force majeure clause is critically important when determining if the clause excuses the nonperformance of a contractual obligation.
When is Force Majeure Used?
COVID-19 sparked a sharp uptick in force majeure claims due to the inability to gather, shop, or work as normal. Given the frequency of widespread illness in the past, an argument could be made that the pandemic was not unforeseen. However, the stay-at-home orders were unprecedented and would be considered an unexpected event in most cases.
Force majeure clauses during the pandemic helped to relieve contractual obligations for tenants who required a later rent payment, leasees who were no longer allowed to host an event, production lines with obligations who were no longer able to work with a full staff, and many more.
What are the Requirements for a Valid Force Majeure Clause?
A force majeure clause in a contract alleviates both parties from liability when unforeseen events occur. For a clause to be valid, it should include:
- An outline of the events that will trigger the clause’s activation.
- Listed events that are unpredictable at the time of the contract’s construction.
- Triggering events must directly impact performance by either a delay or nonperformance.
- The affected party must take reasonable steps to minimize the impact on performance.
An example of a force majeure clause is:
- Neither party will be liable for costs or damages due to delay or nonperformance under the contract or any cause or event beyond the party’s control, including labor strikes, work stoppage, power or other mechanical failure, or natural disaster.
How to Determine if a Business has a Claim for Force Majeure?
To evaluate a potential force majeure claim, the following steps should be considered:
- Evaluate the contract: Carefully review the agreement and determine the presence of a force majeure clause. If a clause is present, review the specific events outlined in the provision that may provide grounds for the claim. If the event is not specifically listed, determine if the clause includes language that may cover the offending event.
- Determine causation: If a force majeure clause is present, compare the specific events outlined in the clause against the particular act that is occurring. Ohio law mandates that the party claiming force majeure is responsible for proving that the event directly caused an inability to perform. The occurrence of an event specified in the clause does not automatically mean that the party was unable to uphold their obligations, just as the inability to perform does not mean there is a force majeure event.
- Evaluate available solutions: Many contracts containing these clauses will also include specific solutions for events listed in a claim. These solutions may range from an extended deadline for performing the obligations of a contract to the ability of the affected party to terminate the contract with no liability.
- Evaluate options and create a strategy: Once possible solutions have been considered, a plan should be implemented to address the issue.
- Lack of force majeure clause: If no express clause was included in the contract, the affected party may still argue to avoid obligations through other general termination provisions. Many states also have common-law doctrines to address contractual obligations that become impossible to uphold or that excuse performance.
What is Impossibility or Impractibility of Performance?
As stated, contracts that do not include a force majeure clause may still offer other protections for nonperformance. For example, contracts involving the sale of goods state that a delay in delivery or non-delivery is not considered a breach of performance if it has been made impracticable by an event that was not present when the contract was made.
Other contracts include clauses stating that if a party’s performance is made impracticable through no fault of their own but through the occurrence of an event that was not present at the time of contract construction, then the duty to render that performance is discharged unless specific language indicates otherwise.
Ohio recognizes impracticable performance as impossible and requires proof that an unforeseen event renders the performance of a contractual party impossible.
Impossible performance does not apply to situations where upholding obligations has become more difficult, impractical, or expensive.
Ohio law states that if enacted laws or government action render contractual performance unlawful, the contract is terminated. However, if the government action only temporarily prohibits upholding the contract without condemning the subject, the contract is still enforced but dormant, and once the constraint is removed, the service must be completely performed.
How Does Force Majeure Compare to Pacta Sunt Servanda?
Force majeure clauses often conflict with the legal principle of pacta sunt servanda, which means “agreements must be kept.” Pacta sunt servanda is a fundamental part of contract law and enforces that pirates are bound by their agreements and must fulfill obligations.
However, when force majeure is warranted, the affected party can argue that they are unable to uphold the obligations due to circumstances beyond their control. This may lead to a discrepancy between the two principles because one places importance on upholding agreements while the other recognizes the impact of extraordinary events.
Do You Need an Attorney?
A force majeure clause in a contract can be complicated to claim and easy to discredit. If you have questions about your legal contract, call Watson Kuhlman, LLC, at 216-208-7858 or complete a contact form to schedule your free consultation.
