Does Force Majeure Need to Be in a Contract
However, the term cannot be extended to delays caused by bad weather, football matches or funerals: the English case of Matsoukis v. Priestman & Co (1915) stated that “it is the usual incidents that interrupt work, and the defendants undoubtedly took this into account when drafting their contract. The words “force majeure” are not words usually found in an English contract. They are taken from the Napoleonic code and were inserted by this Romanian gentleman or by his advisors, who probably knew their use on the continent. In Hackney Borough Council v. Dore (1922), it has been stated that “the expression implies a certain physical or material constraint and does not imply a reasonable fear or apprehension of such coercion”. On the other hand, in the past, the benefit was not excused if the impossibility or difficulty was caused “only by financial difficulties or economic difficulties, even up to insolvency or bankruptcy”. [9] Some New York courts have dismissed allegations of impossibility related to an economic downturn on the grounds that “the risk of a change in economic conditions or a deterioration in a party`s finances is part of virtually all contracts.” [10] Overall, the court ruled that the pandemic was considered a case of force majeure in the contract pending before it. For example, parties in the United States have used the COVID-19 pandemic as force majeure to avoid contractual liability by applying the elements of one (1) unforeseeable event, (2) beyond the control of the parties, which (3) makes performance impossible or impracticable. [8] [untrusted source?] Therefore, force majeure in areas prone to natural disasters requires a definition of the extent of the event for which force majeure could be considered as such in a contract. For example, in a highly seismic zone, a technical definition of the range of motion on the site could be established on the contract, for example, on the basis of probability studies. This parameter or parameter can be monitored later on the construction site (according to a jointly agreed procedure).
An earthquake can be a small shock or a damage event. The occurrence of an earthquake does not mean the appearance of damage or disturbance. For small and medium-sized events, it makes sense to define requirements for contracting processes; during major events, this is not always feasible or economical. Terms such as “earthquake damage” in force majeure clauses do not contribute to the clarification of disturbances, especially in areas where there are no other reference structures or where most structures are not seismically safe. [5] Depending on the extension of the event and its specific impact in a contract, the COVID-19 outbreak based on the aforementioned Rebus-Sic-Stantibus rule may also modify the contract, postpone deadlines, force a financial adjustment to restore the contractual balance, etc. In Argentina, force majeure can be used in civil liability in connection with contractual or non-contractual obligations. A party who cannot invoke force majeure is deemed to be in breach of contract. Therefore, under Section 1231-1 of the FCC, a party`s civil liability may be assumed, which may require the party to make reparation for the damage suffered by the other party as a result of the non-performance.
This may include the payment of damages plus interest. In general, for the delivery of goods or processing/service contracts (other than employment contracts), the following generally applies: Under U.S. law, a force majeure provision is not implied by law with respect to most contracts. Rather, it is up to the parties to negotiate a provision on force majeure, the definition of a case of force majeure, notification obligations and other relevant provisions. However, U.S. courts have held that the terms of the contract may alter the applicability of the UCC and that the mutual intent of the parties at the time of signing the contract has an effect. For example, the parties may provide in their force majeure clause that performance will be excused due to a “difficulty” or standard that is less demanding than the “unreasonable” or “prohibitive” costs required by the UCC. In addition, Article 2 regulates only contracts for the sale of goods.
Unless state law otherwise recognizes impracticability as a defence to the common law (for example. B in California), the performance of contracts for services or real estate will not be excused on the basis of commercial impracticability. In addition, the party`s failure to perform would allow the other party to invoke a plea of non-performance under Section 1219 of the FCC, thereby suspending performance of its own contractual obligations. 11. What steps can I take if a case of force majeure may apply to my contract? Not so long ago, there was a danger that the force majeure clause would be dismissed as a list of potential disasters, each of which is unlikely, embedded in the boilerplate at the back of a commercial contract. Then came 2020, and force majeure came to the fore as COVID-19 and government shutdowns wreaked havoc on leases and commercial contracts. Disruptions have led to litigation and a growing awareness that we cannot ignore the potential applicability of force majeure to our trade agreements. A positive aspect on the horizon is that previous case law provides lessons of cautionary tale about what we need to consider when drafting and interpreting force majeure commercial contracts.
If these options do not help, it is likely that the party concerned will breach the contract, unless it can renegotiate or modify its terms or assert that other contractual provisions (. B for example, the MAC or MAE clauses) apply, which may excuse future performance of the contract. .