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ANALYSIS: It’s Time to Rewrite Force Majeure

March 22, 2021, 8:17 AM

The next force majeure catastrophe will be as unexpected and unpredictable as Covid-19 was. Whatever form it takes, transactional lawyers will likely not have provided for it in contractual force majeure clauses. Will we again struggle to fit the unexpected into a traditional force majeure construct such as “act of God”? Probably, but we don’t have to. Instead, we should simply change the way we write these provisions.

Major catastrophes have a habit of being unique, and they don’t fall neatly into the litany of horrible happenings by which “events of force majeure” are defined. When the Covid-19 pandemic hit a year ago, lawyers fielded unending questions about whether the event qualified as “force majeure.” The very lawyerly answer, of course, is “It depends.” It depends on the wording of the clause in the agreement. As we’ve all come to understand, force majeure is a contractual provision; it has no substantive meaning apart from the specific wording used in the contract. Before March 2020, few prescient practitioners listed “pandemic” or “epidemic” or “government lockdown” in their definitions of force majeure. So, the answer has depended on what was listed—and how courts have interpreted the clause when the list comes up short.

Some practitioners and commentators have taken the position that we should abandon that list, and simply rely on the generic description “any cause beyond the reasonable control of a party.” There is a lot to say for this approach. After all, the purpose of a force majeure clause is to provide a contractual excuse to a party whose performance is prevented or delayed by an external cause that the parties did not provide for and that cannot be avoided using reasonable measures.

The excuse can be just that simple: any cause—we don’t have to try to guess—that is beyond the control of a party and that the parties did not otherwise provide for. Let’s not even call it force majeure; call it “performance excuse” or “contingency.” This way, we’ll save a lot of words in the contract drafting process and maybe have a result more in line with the parties’ expectations.

Bloomberg Law subscribers can find related content on our In Focus: Coronavirus (Covid-19) and Practical Guidance: Force Majeure resources.

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To contact the reporter on this story: Denis Demblowski in Washington at ddemblowski@bloomberglaw.com

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