CONSTRUCTION LAW
Force majeure clauses
A force majeure clause permits a party to delay performance or
to be excused from performance entirely upon the occurrence of
a “force majeure event” that renders performance commercially
impracticable, illegal or impossible.2 Few events have shaken the
business world like COVID-19, but is it a force majeure event? The
coronavirus pandemic has engendered a wave of litigation about
just that. It is becoming clear that the answer rests primarily, if not
exclusively, on the language of the particular force majeure clause.
Force majeure clauses generally list a series of qualifying force
majeure events. Clearly, events like “disease, epidemics or pandemics”
would include the coronavirus pandemic. However, few force
majeure clauses contain these events. Instead, most litigation has
involved whether events like “acts of god, compliance with governmental
orders or other circumstances beyond the reasonable control
of the parties” are sufficiently broad to include the coronavirus
pandemic. See In re Hitz Rest. Grp., 616 B.R. 374, 378 (Bankr. N.D.
Ill. 2020) (finding that the governor’s stay-at-home order triggered
the “governmental action” and “orders of government” provisions
of the force majeure clause, allowing a 75% rent abatement); AB
Stable VIII LLC v. Maps Hotels & Resorts One LLC, No. CV 2020-0310-
JTL, 2020 WL 7024929, at *64–65 (Del. Ch. Nov. 30, 2020) (finding
that broad force majeure language such as “act of god, natural
disaster, or calamity” may include pandemic-related risk).
Even if “pandemic” is an express force majeure event, however,
the contractor suffering from pandemic-related price increases
may not be able to obtain relief. Many force majeure clauses explicitly
state that they will not excuse the parties from obligations
to make payments. Moreover, the fact that performance will be
less profitable or cause a loss will rarely excuse performance. See
Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1288 (Fed. Cir.
2002) (finding that government policies affecting the profitability
of a contract but not precluding performance are not sufficient
to trigger a force majeure clause); Langham–Hill Petroleum, Inc.
v. S. Fuels Co., 813 F.2d 1327, 1330 (4th Cir. 1987) (rejecting a force
majeure argument based on unprofitability arising from the collapse
in world oil prices caused by the actions of Saudi Arabia’s government
and noting that “if fixed-price contracts can be avoided
due to fluctuations in price, then the entire purpose of fixed-price
contracts, which is to protect both the buyer and the seller from
the risks of the market, is defeated”).
That is not to say that increased prices can never lead to
excused performance. Extreme increases in prices can lead to
excused performance. See Moyer v. Little Falls, 510 N.Y.S.2d 813,
815 (Sup. Ct. 1986) (holding that a price increase of over 650%
“was not and could not have been within the contemplation of the
parties,” that the price increases were “excessive,” and the “future
2. One might understandably wonder what the purpose of a force majeure provision is if it only applies when a force majeure event renders
performance impracticable, illegal, or impossible. The common law of contract already provides for excused performance in the case of
impracticability, illegality, or impossibility. The answer is that force majeure provisions can define the force majeure events, the types of performance
excused, and the remedies given to the parties. See Stein v. Paradigm Mirasol, LLC, 586 F.3d 849, 857 (11th Cir. 2009) (citing several
state court opinions and noting that “force majeure clauses broader than the scope of impossibility are enforceable under Florida law”). The
applicability of a force majeure provision is very much a contract by contract issue.
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