At A Glance: What is force majeure

By: Cristina N. Hyde, JD

With the new coronavirus disease officially achieving pandemic status last month, many small business owners are experiencing increased concern about their economic survival.  Contributing to that concern is the real possibility that New Jersey businesses will not be able to fulfill existing contractual obligations due to the natural consequences arising from containment strategies such as social distancing and Governor Murphy’s recent stay-at-home order.  Similar problems have arisen for our New York and Pennsylvania businesses with similar orders being entered by Governor Cuomo and Governor Wolf, respectively.

The good news is that existing contracts may address the impossibility of carrying out obligations in the form of a force majeure clause.  Force majeure is defined as “a superior or irresistible force,” or “an event that cannot be reasonably anticipated or controlled.”  A force majeure provision is contractual language that provides a defense against liability when performance under a contract becomes impossible.

Whether or not COVID-19 is a triggering event, excusing you from your contractual obligations, depends entirely on your contract’s specific language. Force majeure provisions are often the subject of negotiation.  Sometimes parties will agree upon specific extraordinary events, such as natural disasters otherwise known as “acts of god.”  Other times, contracts may simply contain broad language that refers to any and all acts beyond the parties’ reasonable control.    In almost all cases, your force majeure provision will also define who bears the responsibility for invoking the clause and indicate associated remedies.

If you are thinking of acting on a force majeure clause, it is important you abide by contractual notice requirements and take immediate steps to mitigate damages.  To this end, we recommend that you discuss your options with counsel before taking action.

If you would like assistance with interpreting your contract language and assessing your options during this difficult time, please give us a call.  Campanella Law Office remains fully operational and ready to help.

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