Can a force majeure clause protect your business from a breach of contract claim?
The world is an uncertain place, and good contracts seek to anticipate as many potential problems as possible -- including circumstances where it becomes exceptionally difficult, if not outright impossible, to fulfill your end of a bargain. Force majeure clauses and other clauses that address the impossibility or impracticality of one party’s performance can save the day when disaster strikes. Most importantly, they can give you a defense against a breach of contract claim by allowing you to cancel the contract when certain conditions are beyond your control. Typically, force majeure clauses reference things like natural disasters (“acts of God”), labor strikes, supply chain interruptions and other foreseeable events. These clauses also usually try to allocate a certain amount of risk to one party or the other and are often narrowly defined so that they aren’t abused.What sort of things can put a force majeure clause into play? Consider these examples:
You agree to sell a customer a large supply of some chemicals they need for their own business -- right before the government makes the sale of those chemicals in that quantity illegal.
Your business partner, a renowned architect, suddenly dies right after agreeing to provide a custom home design for one of your clients.
You agree to deliver a product to one of your business contacts, but a labor strike in mines halfway around the world makes obtaining the raw materials you need to make the product impossible.
It’s important to note that force majeure and similar clauses usually require the situation to be unavoidable, not the result of one party’s negligence. It’s also wise not to use boilerplate language that’s overly broad in these clauses, since those may be open to unexpected interpretations by a court. Even a well-drafted contract can end up being unenforceable. If you have a question about your legal obligations under a specific contract or the ability of another party to terminate your agreement, it may be wisest to speak with an experienced advocate about your situation.