Force Majeure Clauses in Contracts: Drafting and Enforcing Provisions for U.S. and International Agreements

Description

As the global economy faces unforeseeable times with future catastrophes, many businesses risk potentially defaulting on contractual obligations. Companies are looking more closely at the force majeure clause, a boilerplate feature of most agreements, to mitigate some liability. Although not often negotiated or considered by counsel, force majeure provisions provide an affirmative defense to default. However, especially post-COVID, businesses must no longer ignore the potential applicability of force majeure to commercial agreements.

Amid the current economic uncertainty, businesses must determine whether circumstances presented by a potential catastrophe meet the legal requirements of force majeure and that such provisions are sufficiently specific to be enforceable. For a party to invoke the clause, the event must be unforeseeable. Boilerplate agreement language often includes a laundry list of events defining an "act of God," but a court may or may not agree that a specific catastrophe is a covered event. Further, enforcement of a force majeure clause requires that the company prove that the force majeure event defined in the contract caused a party's inability to perform a contract obligation.

Force majeure enforcement is also highly contingent on the country of implementation and often the impact of the catastrophe on a region's supply chain and workforce. China and the European Union use varying definitions for enforcement, and anticipating issues that may arise in a default informs counsel on how to draft the optimal provision to protect a business from future catastrophic losses.

Listen as our expert panel provides practical advice on drafting a precise and enforceable force majeure provision so counsel may save their clients from unforeseen circumstances upon the next global emergency.