Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Force Majeure Clauses Can Soften the Blow of Devastating Hurricanes

Author: Scarinci Hollenbeck, LLC

Date: September 28, 2017

Key Contacts

Back

During And In The Wake Of The Storms, Businesses Across The Country Have Taken A Closer Look At The Force Majeure Clauses In Their Business Contracts

Few U.S. businesses have been able to escape the disruptions caused by Hurricanes Harvey and Irma early in 2017’s hurricane season. The back-to-back storms have interfered with fuel and product supply and demand and manufacturing, distribution, and other essential business activities. They have caused considerable losses.

During and in the wake of the storms, businesses across the country have taken a closer look at the force majeure. While these clauses can be overlooked as “boilerplate” form provisions, like other boilerplate their wording can become extremely important when disaster strikes.

Including and Drafting Force Majeure Clauses

Force majeure, meaning “superior force” in French, can relieve a party from performing duties under the contract in certain circumstances. The circumstances may include those deemed beyond the party’s control and that make performance inadvisable, commercially impracticable, illegal, or impossible. Apt examples include natural disasters like hurricanes, floods, earthquakes, and other events commonly referred to as “acts of God.” However, they may also apply to man-made disasters including include war, terrorism, civil disorder, supply shortages, and labor strikes.

Without a force majeure clause in an agreement, parties may rely on less specific common law remedies such as impracticability and frustration of purpose, which may be less predictable in interpretation and much less favorable to the party whose performance is impeded. Therefore, it is imperative that every business consider whether its supply and production agreements contain a specifically drafted force majeure clause.

Like other contract provisions, force majeure clauses may come in many typical forms which can be customized to meet the reasonable needs of the contracting parties. Some standard provisions are worded too narrowly or even too broadly, so it is important to make sure that it provides reasonably sufficient protection for any party needing it. For example, some provisions only excuse performance when it is impossible, rather than impractical (untimely, expensive etc.). Other provisions may list certain circumstances that excuse performance, rather than including a catchall such as “other unforeseeable events beyond the control of the parties.”

Enforcing Force Majeure Clauses

When disaster looms or is in progress, one of the first steps will be to evaluate a business’ major agreements and its force majeure clauses, as well as to determine whether a contracting party or counter-party may invoke the clause. The terms of the contract may be ambiguous as to whether the event qualifies, and the party seeking to rely on the clause may have the burden of establishing the occurrence of a force majeure event.

The terms of the contract are likely to specify specific and detailed notice requirements that may be required, as well as a timeline for providing such notification. Businesses will review agreements to determine if either party is subject to mitigation or allocation requirements. Many agreements require the impacted business to use “best efforts” and/or act “in good faith” to resume normal operations in the wake of a force majeure event. A contract will also often state which obligations may be deferred or relinquished, and which duties may remain in force.

Because dealing with hurricanes and other disasters can be unexpected and costly, it is always best to review any applicable force majeure provisions for the business’ major agreements.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Charles Yuen, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"
SPACs Are Back, What You Need to Know post image

SPACs Are Back, What You Need to Know

Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]

Author: Dan Brecher

Link to post with title - "SPACs Are Back, What You Need to Know"
Short Form Merger: Streamlining the Process for Businesses post image

Short Form Merger: Streamlining the Process for Businesses

Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]

Author: Dan Brecher

Link to post with title - "Short Form Merger: Streamlining the Process for Businesses"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!