Many businesses are dusting off the seldom used force majeure clause in their agreements because of the current pandemic (due to government orders or otherwise). We have touched on this topic before. But what is a force majeure clause and what does it do? A force majeure clause allows a party to delay, suspend, negate, or terminate a contractual obligation. A force majeure clause is a risk allocation tool to provide an “out” for a performance obligation that becomes impractical or impossible due to unanticipated or uncontrollable circumstances. Courts will often enforce a force majeure clause if the intervening circumstances that are impacting performance are unforeseeable and not reasonably avoidable.

The reliance on, nuance, and enforceability of these force majeure clauses has been discussed at length by many legal commentators. To recap most articles on this topic in one sentence: the definition of a force majeure event and the terms surrounding that definition in the specific agreement at issue will, in most cases, determine the ability of a party to use the force majeure language to avoid performance (and the related cost in doing so).

Many business disputes occur because of poor drafting and because parties rely on “boilerplate” contract language that receives little attention. Before the recent pandemic, force majeure clauses received far less attention. But we expect to see a proliferation of lawsuits focused on the doctrine of force majeure and previously ignored contract language – leading to unintended outcomes by the parties.

But what about new contracts – those entered into in the post-COVID-19 world? Parties will find it more challenging to argue that a virus/pandemic of this scale is unforeseeable given recent events.

What does this mean for your business? It means that you are going to start seeing more parties paying attention to the force majeure language in contracts. You may even see some new language or language that becomes increasingly common in your contracts. For example, you will likely see:

• New exceptions to the definition/what constitutes a force majeure event. For example: “Any delay, loss, or failure caused by the COVID-19 pandemic will not be considered a force majeure event.”
• The word “pandemic” will likely be included more as a specifically listed force majeure event.
  • Increased use of the “pandemic” term inside a force majeure clause may be defined in varying degrees of scope:
    • Without a definition;
    • Tied to certain parameters (for example: when the World Health Organization declares a worldwide pandemic);
    • Tied to something that directly impacts your operation(s) (for example: a state governor ordering a closure of some sort where your business operates, stay home orders, quarantine orders, etc.). NOTE: many businesses deemed “essential” have less concern about local government orders impacting their business operations.
    • Tied to specific “foreseeable” pandemics (those of which we are already aware) with reference to specific outbreaks (for example: the COVID-19 pandemic, or the resurgence of COVID-19 in a subsequent calendar year).
    • Time limited (for example: arising out of COVID-19 which causes a delay in performance for more than sixty (60) calendar days).
  • Well-counseled parties with more negotiating leverage pushing for favorable force majeure clauses in contracts, as well as provisions that address unforeseeable events in general.
  • More carveouts for events similar to COVID-19 in the insurance arena, where many policies already except loss caused by bacterial or viral outbreaks.

More specific (and better drafted) force majeure contract language reduces uncertainty and may help a business avoid the need for costly litigation to interpret or enforce its agreement(s). Being mindful of the so-called “boilerplate” provisions in agreements is never a bad idea. Our attorneys are experienced in drafting and negotiating force majeure provisions in myriad types of agreements. Hope is not a strategy. You should enter into business contracts aware of the risks assumed (known or unknown) by knowing the law and how these force majeure clauses will impact your business operations – should certain unforeseen circumstances occur.