It’s been an interesting year for force majeure clauses.
After a 1,300-foot container ship blocked the Suez Canal for six days in March 2021, stranding hundreds of other ships carrying construction materials and supplies, industrial projects around the world went on pause. The blockage cost over $50 billion in lost trade revenue, and contractors have faced a wave of disputes over project delays, raising the big question for those bound to contractual agreements:
When can force majeure clause be invoked?
The Suez Canal Blockage of 2021 was unique in how it forced us to rethink our definitions of disasters or “acts of God.” But back here in Pennsylvania, where the economy is reopening and gaining momentum, we will forever remember the financial repercussions of COVID-19. And so property owners, tenants, and contractual parties everywhere are demanding that pandemic and lockdown-related restrictions qualify as force majeure events.
So, can force majeure clauses be invoked in a pandemic? Hoegen & Associates, P.C. is here to explain everything you need to know. Contact us today!
What Is Force Majeure Clause?
A force majeure clause is a provision within a contract that limits liability and can temporarily excuse claiming parties from performing and meeting their contractual obligations due to exceptional events or circumstances that are not “reasonably foreseeable.”
The ability to claim force majeure varies on a contract by contract basis. Most contracts and lease agreements define natural disasters, labor strikes, civil disturbances, acts of God, and war as not “reasonably foreseeable.” Rarely do cases of economic hardship qualify as force majeure events.
Can Force Majeure Clause Be Invoked in a Pandemic?
Pandemics aren’t usually referenced as force majeure events in contracts and lease agreements. Still, it is possible for parties to claim pandemics as force majeure events, even when it is not explicitly stated in a contract or lease agreement ‒ but successfully doing so can be an uphill battle.
If a party wishes to claim a pandemic or lockdown as a force majeure event, they will have to prove that the event was not “reasonably foreseeable.” They will also have to prove that the event impaired or interfered with their performance and ability to meet their contractual obligations.
Some claiming parties may be able to make the case for catch-all phrases. In addition to specific terms or events, lease agreements or contracts can contain language that broadly covers all possible causes or events that are not “reasonably foreseeable.”
Whether the claiming party provided sufficient notice of the event and made a concerted effort to perform and fulfill their obligations, regardless of the circumstances, are also major considerations in these cases.
When Can Force Majeure Clauses Be Invoked in Pennsylvania?
Qualifying pandemics as force majeure events vary on a case-by-case basis in Pennsylvania.
The written language of an agreement or contract is a major factor when invoking force majeure clauses. Pennsylvania courts are rarely flexible in their interpretations of this language.
Claiming parties also face the burden of proving their due diligence in these events, and can still face legal consequences for not fulfilling their contractual obligations if they are unsuccessful.
Nonetheless, small businesses, property owners, and any contractual party still have the right to argue pandemics as force majeure events.
Know Your Rights When It Comes to Force Majeure Clauses
One year after the outbreak of COVID-19, there has been a greater push for commercial force majeure clauses to include pandemic and lockdown-related restrictions. While property owners, tenants, and contractors continue to face challenges in performing and meeting their contractual obligations, force majeure clauses will become a more prominent issue for debate.
Hoegen & Associates, P.C. recently explored force majeure clauses, what they are, and how they work in commercial leases. As we continue to help individuals and entities understand their rights in lease agreements and contracts, when force majeure clauses can be invoked will continue to be an ongoing debate.
If you are facing commercial foreclosure or are currently in a lease or contractual dispute, contact our attorneys today. We look forward to speaking with you!