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How can unforeseeable and unavoidable events affect contracts?

On Behalf of | Nov 22, 2022 | Business & Commercial Law

Compliance with contracts is an important and legal requirement. But unforeseeable and unavoidable circumstances can remove contract liability in some circumstances.

Force majeure

Under business and commercial law, a force majeure contract clause may remove liability for breach of contract after parties are prevented from fulfilling their obligations due to unforeseeable and unavoidable catastrophes.

These clauses are generally associated with natural events, such as hurricanes or floods and human actions such as war. These events must be unforeseeable, external to the contract parties and unavoidable. Neither party can be responsible for the event.

A force majeure clause is an exception from the legal presumption that parties must comply with contracts. By design, force majeure terms are intended to be strictly interpreted.

Foreseeability has become more complex. Previously unforeseen events such as solar flares, asteroids, volcanoes, and pandemics are now anticipated. Cyber, nuclear and biological warfare are now somewhat foreseeable as human threats.

If a natural or manmade disaster happened in a location before, it may not be considered unforeseeable. However, force majeure clauses that contain a definition of these events may be enforceable.

Examples

Events that may fall within a force majeure clause include armed conflict, a terrorist attack, pandemic, or natural disasters such as a flood, tornado, earthquake or hurricane. Climate change is also adding natural events that can make compliance impossible.

Impact

These clauses help parties manage risk and protect themselves when there are unanticipated events.

But a force majeure clause that is not unambiguous and transparent generally favor bigger business. Smaller business may have to expend time and money for enforceability.

Attorneys can help business draft these and other important contract clauses which are effective and meet their needs. They can also help protect their interests if there are contract disputes.