Legal Aid: Understand Force Majeure

Using the force in your contracts

By Peter J. Lamont, Esq.

April 02, 2010
 

One of the prime areas of concern for kitchen and bath companies with respect to the successful performance of a signed contract is focused around manufacturing and shipping delays, which can create liability and are rather commonplace throughout the industry. Manufacturing and shipping delays affect small local companies as well as large national companies, and everyone in between. In particular, this winter’s snowstorms have created numerous shipping and manufacturing delays for a large number of companies. As a matter of fact, Amazon.com recently posted a statement on many of their items indicating that because of inclement weather, many scheduled deliveries were delayed.

The kitchen and bath industry differs vastly from Amazon.com. Customers, including individuals, general contractors or large construction companies, are always concerned about delivery dates and deadlines. Quite often cabinets are ordered with a specific delivery date that will allow other trades, such as plumbers and electricians, to complete their tasks before the cabinets are installed. A fair amount of litigation in the industry stems from manufacturing and delivery delays. So how can you protect your company from such liability? The answer is to use the "Force" in all of your agreements. This is not the mystical "Force" of Star Wars but rather the force majeure clause.

USING THE FORCE

Force majeure is a French word that literally means "superior or greater force." The force majeure clause serves to excuse a party from liability if some unforeseen event beyond the control of that party prevents it from performing its obligations under the contract. In other words, a force majeure clause provides a means by which the parties may anticipate in advance a condition that will make performance impracticable. Such clause conditions a party’s duty to perform upon the non-occurrence of some event beyond its control and serious enough to interfere materially with performance.

Typically, force majeure clauses cover natural disasters or other "Acts of God," war, or the failure of third parties, such as suppliers and subcontractors, to perform their obligations to the contracting party. It is important to remember that force majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.

BE SPECIFIC

When creating your force majeure clause, it is beneficial if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, inclement weather and other major events that are clearly outside a party's control. Inclusion of examples will help to make clear the parties' intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.

A typical example of a force majeure clause is as follows:

"Neither party shall be liable in damages or have the right to terminate this Agreement for any reasonable delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including, but not limited to Acts of God, Government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected."

Yet another example is:

"Delivery dates, when given, are approximate. Seller shall not be liable for any reasonable delaying performance or failure to perform which is attributable to any cause beyond its immediate control, including, but not limited to, Acts of God, fire or other catastrophes, strikes, pickets, civil or military authority, fabrications delays, inability to obtain materials, transportation delays or other causes beyond its control."

In general, courts will enforce properly constructed force majeure clauses. When analyzing the enforceability of a force majeure clause, the courts will consider the contractual terms, the surrounding circumstances and the purpose of the contract. Notwithstanding the foregoing, the ultimate key to the enforceability of a force majeure clause is that the supervening event which prevents performance under the contract must be beyond the control of the seller.

Using a force majeure clause in your contracts may help your company avoid liability the next time Mother Nature decides to muddle up your manufacturing or delivery schedules. While it is recommended that you seek the advice of an attorney in preparing your contracts, the sample clauses above can be incorporated into your company’s contracts.

—Peter J. Lamont, Esq., is a commercial litigation attorney with offices in Hawthorne, NJ, as well as Massapequa, NY. His practice focuses on the representation of small- to large-size companies in the building and design industry, as well as individual designers and architects. To contact him with questions and suggestions on topics for future articles, please email him at plamont@peterlamontesq.com or call him at (973) 949-3770.