Creative Contracts: How Force Majeure Clauses Impact your $$$

CORONA VIRUS AND CONTRACTS: FORCE MAJEUR CLAUSES

Force Majeur Clauses

“Superior Force” or “Act of God”

If you are bound to a contract for service or performance that is scheduled to take place this season, or has been cancelled due to COVID-19, you should refer to your contract for a Force Majeure clause. Force Majeure means superior force, in english and refers to circumstances outside of a person, entity or brand’s control that prevents them from fulfilling their contractual obligation. These clauses are relevant if there's a dispute about either party’s obligation to fulfill the contract. In many cases, this means payment for services performed, or in the process of being rendered.

If your contract does not contain a Force Majeure clause, look for any language that mentions acts of God, or unforeseeable circumstances, etc. These clauses are considered boilerplate, which means they are usually located towards the end of the contract near the signature blocks. You might even find this language in the Term/Payment clause, which discusses the length of the contract, obligations of both parties and occasionally, what happens if there is a circumstance that prevents the paying party from compensating you.

Force Majeure Clauses are relevant if a contract dispute is being litigated or mediated. They are also fact-based, so the Court or mediator will view the clause through the lens of several elements to determine whether triggering a force majeure clause is applicable to the circumstances. For instance, courts will consider (1) whether the event (in this case, COVID-19/ a global pandemic) qualifies as a force majeure under the contract, (2) whether the risk of nonperformance was foreseeable and whether this risk was able to be mitigated and (3) whether performance is truly impossible. (paulweiss.com). The court or mediator’s primary focus is whether the clause encompasses the type of event the contracting party claims is the reason for their inability to render payment/performance. Most contracts for services in the U.S. probably fail to mention a global pandemic. Pandemics just haven’t been on the radar of the American zeitgeist in recent years. This is technically good news for those who’ve been contracted for their services and have yet to be compensated.

Even if the contract includes language regarding a global health pandemic, the contracting party is still legally obligated to mitigate any foreseeable risk of a global pandemic, for instance. Meaning, the courts will likely look to whether the event triggering the force majeure clause was foreseeable and could have been mitigated.

Also, and I think this is quite relevant, the courts will look to whether the cancellation of the event/gig that is the subject of the contract was due to impossibility or impracticability. This means that anyone who cancels the contract needs to show that fulfilling the contract was actually impossible and not just impractical. In most cases, impossibility does not mean financially or economically, the contract was more difficult to satisfy. It means that there were a multitude of factors that trigger the force majeure clause and therefore validate the cancellation of the contract. These laws are state-specific, so this information could vary in other jurisdictions. If there were other means of providing compensation for performance of services/ a gig, then the canceling party could possibly be liable for non-payment/non-performance under the contract.

The last thing I want to discuss are Notice provisions, which I will dive into more in depth later. Briefly, though, I want to mention that you should look into whether your contract mentions that notice is required before canceling a contract. If you weren’t given proper notice, Go get your money boo.

Ultimately, the result of the canceling party claiming force majeure and a judge/mediator finding otherwise is a breach of contract.

I hope this very brief overview of Force Majeure clauses was helpful. Leave a note in the comments if you have more questions related or unrelated to this video. See you next time!

Peace.