Many businesses are facing situations that may excuse or delay their obligations to perform under existing contracts due to the occurrence of a force majeure event as we navigate through the pandemic caused by the novel coronavirus. Today, we at Kajioka & Associates Attorneys at Law, would like to discuss the force majeure clause.
Force Majeure Examples
When certain circumstances are beyond control, a force majeure is a contract provision that allows the contract parties to be excused from performing their contractual obligations. To allocate the risk of force majeure events, the parties to a contract negotiate the list, usually. Since the specified force majeure event is listed or not listed, the parties can choose to negotiate them, they include the following:
1) Civil unrest, war, hostilities, and terrorist acts
2) Alterations in laws, regulations, zoning, embargoes
4) Supplies, power, infrastructure, or transportation shortages
5) Natural disasters such as floods, earthquakes, hurricanes, tornados, wildfires, usually depending on local practice or experience. Keep in mind that more exhaustive the list, the more likely that a court will potentially exclude any natural disaster not specifically listed in the force majeure clause.
6) Pandemics, epidemics, and quarantines.
Open Ended Sentences & Language
Generally, parties include open-ended or catch-all language, phrases like “Acts beyond the Parties reasonable control” “Acts of God,” or “including, but not limited to,” are used to cover any other event not listed. The affected party is excused from performance if the specified event is listed, and if the specified event happens. Future contracts are likely to change since many force majeure clauses do not mention epidemics, diseases, or pandemics in their force majeure clause. For this reason, it is essential to review and renew your contracts.
Is COVID-19 a Force Majeure Event?
Depending upon the terms of the relevant contract, applicable law, and other relevant facts determines what constitutes a force majeure event on a case by case basis. The courts look whether under the particular circumstances, such as an “insuperable interference occurring without the parties’ intervention as could not have been prevented by prudence, diligence and care,” in addition to the force majeure events being not limited to acts of God. The courts will consider:
1) Should the triggering event be expressly listed in the force majeure clause or if it is found in any other clause in the contract.
2) By the parties, the non-performance was foreseeable.
3) The triggering event and the non-performance casual relation.
4) If the performance is truly impossible.
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The burden of proof to demonstrate the scope of the clause and demonstrate that the triggering event is applicable within the contract falls on the party seeking to excuse performance under the contract relying on the force majeure clause. Due to circumstances both beyond the control of the impacted party and for which the party had not assumed responsibility, the party will also have to show that non-performance. Because there have been no reasonable steps that that party could have taken to avoid or mitigate the triggering event or its consequences, if the party will need to show that performance is impossible. The force majeure can help many businesses if it applies. If you are uncertain, contact Kajioka & Associates Attorneys at Law, and let our experienced attorneys look over your contract and see if we can help your business during this pandemic.