Force Majeure Not Included in Contract

Force Majeure Not Included in Contract: What It Means for Your Business

A force majeure clause is a common provision in contracts that excuses one or both parties from performing their obligations when events beyond their control occur. These events may include natural disasters, war, terrorism, strikes, pandemics and government regulations, among others. So, what happens when the contract does not include a force majeure clause?

In such cases, the common law doctrine of frustration may apply, which holds that a contract is automatically terminated when an unforeseeable event occurs that makes performance impossible, illegal or substantially different from what was originally agreed upon. This is different from a force majeure clause, which allows parties to renegotiate the terms of the contract or temporarily suspend their obligations during a specified period of time.

Frustration arises when an event occurs that is beyond the control of either party, and which neither party could have foreseen or prevented through reasonable care. For example, if a concert hall burns down before a scheduled performance, the contract between the concert promoter and the venue owner may be frustrated, as it would be impossible to hold the concert at the venue. Similarly, if a shipping company is unable to deliver goods due to a war, the contract between the shipper and the buyer may be frustrated, as the goods cannot be delivered and the purpose of the contract is frustrated.

However, frustration is a difficult concept to apply, and courts are often reluctant to find that a contract has been frustrated. This is because parties are expected to anticipate and allocate risks that may arise during the performance of a contract, and they have the option of including force majeure clauses that provide specific relief from unforeseeable events. Therefore, it is important for parties to carefully draft their contracts and include force majeure clauses that cover a broad range of events and specify the consequences in case of non-performance.

In conclusion, force majeure clauses are an essential tool for managing business risks and protecting parties from unforeseeable events. They provide a degree of flexibility and control that is not available through common law doctrines such as frustration. Therefore, it is strongly recommended that parties include force majeure clauses in their contracts and ensure that they are properly drafted and up-to-date. This will help avoid costly disputes and ensure that your business is protected during unexpected events.

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