Force Majeure Clauses in Contracts Must Adapt to Climate Change

Climate change has made weather events that once would have been considered extraordinary an increasing part of daily life. In June 2022, a record-breaking monsoon caused severe flooding in Pakistan, leaving 1,500 people dead and 33 million people displaced. In July 2022, Europe endured blazing and destructive wildfires, which California and Canada also have experienced more recently. In September 2022, Hurricane Ian devastated the coast of Florida and caused the region’s most deaths by hurricane in almost 90 years.

As extreme weather events become more frequent, they must figure into our plans in various ways. Engineers plan for sea walls and barriers to protect cities from future floods. Likewise, in considering contractual agreements, we must look at how contractual provisions intended to address the extraordinary will function in a world where what was once unusual is now less so.

Force Majeure in Contracts

When things don’t go according to plan, lawyers first look for the force majeure clause in a contract. A force majeure clause is a contractual provision that excuses a party from performance due to an event beyond the party’s control that prevents the party from performing its contractual obligations.

The concept of force majeure is rooted in the common law doctrine of impossibility and impracticability. A party seeking to invoke the impossibility doctrine under common law must show the event that made performance impossible was unanticipated and couldn’t have been foreseen by the parties.

Most modern contracts include an express clause addressing force majeure, which ranges from boilerplate language to a highly negotiated bespoke provision. Generally, a force majeure clause includes natural disasters such as fires, earthquakes, floods, hurricanes, and tornadoes, as well as man-made events such as war, terrorism, and strikes.

Similar to the common law doctrine, many force majeure clauses explicitly require that the force majeure event couldn’t have been predicted by the parties. Even if the contract doesn’t specifically include foreseeability, courts may impute unforeseeability as a condition and factor it into their analysis.

The New Normal

As extreme weather events occur with increasing frequency, traditional force majeure concepts are causing parties to reconsider what is foreseeable.

Determining the foreseeability of an event is a fact-driven analysis that often involves consulting outside sources. For example, to prove a weather event was unforeseeable, the nonperforming party might use historical weather data and expert testimony to prove that the weather event was rare and/or extreme. Courts may look to the National Oceanic and Atmospheric Administration, the National Hurricane Center, the National Weather Service, and other local and national weather sources to evaluate the foreseeability and extremity of an event.

A primary purpose of a force majeure clause is to allow the parties to allocate risk for events that are outside of their control. Parties relying on boilerplate force majeure clauses may unintentionally find themselves responsible for unwanted risks. Contracting parties should carefully analyze the risks and particular circumstances that could affect them and consider how risks for potential events should be allocated, then seek to draft contractual provisions that precisely address those risks.

In cases where the parties wish to allocate risk or excuse performance for an event that may well be foreseeable, the parties should specify the risk they wish to allocate and address the risk separately from the catch-all list of force majeure provisions. For example, in a region that is vulnerable to hurricanes, instead of broadly including weather conditions or hurricanes as a force majeure event, a party could describe the intensity and duration of a hurricane that would excuse nonperformance.

By avoiding standard boilerplate force majeure clauses that will undoubtedly lead to unexpected results, and by including specific contractual provisions tailored to their needs and circumstances, parties can better predict and control the risk they intend to assume.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Kristina Kopf Thomas is a partner with Eversheds Sutherland. She is a commercial real estate and fund formation attorney with more than 20 years of experience working with real estate industry clients on a range of transactions.

Briana A. James is an associate with Eversheds Sutherland in the real estate practice group where she focuses on commercial real estate matters.

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