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ANALYSIS: Protests, Civil Unrest & Contract Law

June 5, 2020, 8:53 AM

Your force majeure provision may cover this.

From Paris, Texas to Paris, France, cities have experienced mass protests following the death of George Floyd in Minneapolis on May 25. Some businesses located in heavily impacted jurisdictions have experienced a range of disruptions resulting from government-ordered blockades, closures, and curfews, as well as physical damage and theft. Some are implementing preventive measures by boarding up facilities or suspending operations in order to protect employees and property.

Force majeure has emerged as a major force in the age of Covid-19, serving as a tool for businesses to pause or exit contracts when they cannot meet their obligations. But force majeure is not limited to natural events—such as storms, floods, or pandemics—which are sometimes known as “acts of god”.

A “cause outside the control of a party,” one of the common ways force majeure is described in a contract, also refers to human-made events. Whether specifically enumerated in the language of the contract or not, force majeure may provide a contractual excuse in the case of protests, civil unrest, and disturbances stemming from third-party criminal activity, as well as obligations to comply with laws, orders, and other governmental directives given in the course of a protest or civil disturbance.

If your contract contains a force majeure clause, one key question is whether it specifically refers to the type of activity or government order that is causing your inability to perform.

Closely related to this question is the law of the jurisdiction that governs your contract, since there are differences in jurisprudence among the U.S. states and territories. Some jurisdictions require that the type of interruption be expressly included in the contract language, while others take a broader view. Force majeure is a contractual term and not an equitable right; in other words, the absence of a force majeure clause generally means that the parties did not agree to it and it cannot be invoked.

“Riot” is a common enumerated instance of force majeure in commercial contract provisions and may be applicable in circumstances of mass protest and civil unrest. Though much less common, some force majeure provisions also cover “civil unrest,” “civil strife,” or “political unrest.”

Bloomberg Law’s transactional precedent database, which contains all publicly filed contracts in the U.S., indicates that 812 commercial transaction contracts specifically listing “riot” as a force majeure event have been agreed in the last 12 months. On the other hand, fewer than 10 such contracts covered “civil unrest” or “civil strife.” None covered picketing or boycotting, which could emerge as an outgrowth of the current social movement and its connections to the corporate focus on environment, social and governance (ESG) priorities.

Given the events of the past week, we may see more inclusions of “unrest” and “protest” in U.S. force majeure provisions than has been the case historically—not least because many of the disruptions experienced by businesses may stem from lawful protests and otherwise lawful activity that does not fall squarely under the category of “riot.”

Access Bloomberg Law force majeure practical guidance, including form documentation for use by impacted businesses, here.

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