Force majeure. (Legal Jargon).(Brief Article)(Column)

The sufficiency of a contract's force majeure clause has received renewed interest in light of recent events. The catastrophic events of September 11 and the continued threat of terrorism, domestic and abroad, are a grim reminder that tragedy is unpredictable. These events only compound the common risk associated with a cycling domestic economy and unpredictable international markets. In the Post-September 11 contractual setting, a party must contemplate common risks while preparing to allocate the risk of nonperformance to counter events that were once unimaginable.

Defining Force Majeure

Force majeure is a term used to describe a "superior foree" event. The purpose of a force majeure clause is two-fold: it allocates risk and puts the parties on notice of the events that may suspend or excuse performance. The essential condition of force majeure is the prevention of a party's performance that is caused by an unforeseen supervening event not within the control of either party Typical force majeure events include Acts of God, superceding governmental authority civil strife and labor disputes. However, there is no uniform set of events that constitute force majeure. Instead, force majeure is a flexible concept that permits the parties to formulate an agreement to address their unique course of dealings and industry idiosyncrasies. Moreover, recent events have increased the necessity to include events that were once unthinkable, such as terrorism and the threat of biological and chemical warfare.

Negotiating a Force Majeure Clause

A party in the negotiation stage of a force majeure clause should scrutinize the events that constitute force majeure and the risk allocation to assure that the clause is nor one-sided or unenforceable. If an event occurs that is not covered or specifically enumerated in a force majeure clause, courts are reluctant to conclude that a contract is unconscionable. Instead, courts will hold the parties to the benefit of their bargain. Additionally, a party should review the legal effect of enumerating an event in a force majeure clause. For example, a commonly invoked force majeure event is market fluctuation which renders a contract economically unfeasible. A majority of courts refuse to excuse performance because a contract is no longer profitable.

Drafting a Force Majeure Clause

In drafting a force majeure clause, parties may rely on general clauses or specifically enumerate which events will constitute force majeure. For example a general force majeure clause may constsr of the following language: