Force Majeure in Business Litigation
When catastrophe strikes — a pandemic, a natural disaster, a war, a government-mandated shutdown — businesses scrambling to manage disrupted operations often turn to their contracts looking for a way out. The provision they typically find is the force majeure clause, a boilerplate section that most parties sign without a second glance. But force majeure clauses became anything but boilerplate when COVID-19 forced courts around the country to interpret them en masse. The resulting body of case law reveals how narrowly courts tend to read these provisions and how difficult it is to successfully invoke them.
What Is a Force Majeure Clause?
A force majeure clause — from the French for “superior force” — excuses a party’s performance of contractual obligations when certain specified events beyond the party’s control make performance impossible, impractical, or otherwise impaired. These clauses allocate the risk of extraordinary disruptions, taking some of that risk off the performing party when truly unforeseeable catastrophes occur.
Typical Force Majeure Language
A standard force majeure provision might list triggering events such as acts of God, natural disasters, wars, government actions, labor strikes, epidemics, and similar extraordinary occurrences. Modern clauses sometimes include catch-all language covering “events beyond the reasonable control of the parties.” The specific language of each clause determines what events it covers, which is why courts decline to treat all force majeure clauses as interchangeable.
How Courts Interpret Force Majeure Clauses
Strict Construction
Courts interpret force majeure clauses narrowly, as exceptions to the general principle that parties must perform their contractual promises. A party seeking to invoke force majeure bears the burden of proving that the event falls within the clause’s specific language. General hardship or economic difficulty rarely qualifies. Courts require that the event be one explicitly listed or, at minimum, closely analogous to the types of events listed.
The Event Must Directly Prevent Performance
Courts consistently require a direct causal link between the triggering event and the failure to perform. A business that could have performed its contractual obligations — but at greater cost or reduced profit margin — typically cannot invoke force majeure. The event must have actually prevented performance, not merely made it more burdensome or less economically attractive.
This requirement was central to many COVID-19 force majeure cases. Courts frequently held that government shutdown orders did not entirely prevent performance where parties could operate in modified form, perform obligations remotely, or fulfill the contract’s fundamental purpose through alternative means.
Foreseeability and Risk Allocation
Force majeure clauses generally do not excuse performance when the triggering event was foreseeable at the time the contract was signed. If a party in a flood-prone area contracts for construction without addressing flood risk, courts may hold that flood damage was foreseeable and thus not a force majeure event. Similarly, a business that contracted during a known period of labor unrest may be unable to invoke force majeure when a strike disrupts operations.
Government Action as Force Majeure
Government orders — regulations, shutdowns, export prohibitions — are frequently listed as force majeure events. COVID-19 shutdowns produced extensive litigation over whether government-mandated closures constituted force majeure. Courts generally required parties to demonstrate that the government order specifically prevented the contracted performance, not just that it impacted business conditions generally. Restaurants, event venues, and retailers that could not operate as contracted often had stronger claims than businesses that experienced supply chain disruptions.
Related Doctrines: Impossibility, Impracticability, and Frustration
Even when a contract lacks an express force majeure clause, parties may invoke common law doctrines that serve similar purposes.
Impossibility of Performance
The common law doctrine of impossibility excuses performance when circumstances have made performance literally impossible — the subject matter of the contract was destroyed, or a law has made performance illegal. Courts apply this doctrine narrowly and rarely extend it to situations of mere difficulty or increased cost.
Commercial Impracticability
The UCC and the Restatement of Contracts recognize commercial impracticability as an excuse for non-performance when a supervening event — one not within the contemplation of the parties at contract formation — has made performance commercially unreasonable. Courts have been reluctant to apply this doctrine broadly, and mere market fluctuations, price increases, or economic downturns do not qualify.
Frustration of Purpose
When an unforeseen event has so substantially undermined the purpose for which a contract was made that enforcement would be commercially unconscionable, courts may find frustration of purpose. Businesses that contracted for event space, travel services, or similar purpose-specific arrangements had some success with frustration claims during COVID-19, arguing that government restrictions eliminated the fundamental commercial purpose of their contracts.
Notice Requirements and Mitigation Obligations
Most force majeure clauses require the invoking party to provide prompt written notice to the other party as a condition of relief. Failure to provide timely notice can waive the right to invoke force majeure entirely. Additionally, the invoking party typically must demonstrate that it took reasonable steps to mitigate the impact of the force majeure event and resume performance as soon as practicable. Courts look unfavorably on parties who used force majeure as an excuse to simply abandon their obligations without genuine effort to find alternatives.
Frequently Asked Questions
Did COVID-19 qualify as a force majeure event?
It depended entirely on the contract’s specific language and the nature of the performance obligation. Courts were inconsistent in their rulings, but a clear pattern emerged: parties had stronger claims when their contracts specifically listed epidemics, pandemics, or government orders as triggering events, and when the event directly prevented — rather than merely impaired — their specific contractual obligation. Many courts held that increased costs, reduced demand, or supply chain disruptions alone did not trigger force majeure, even in pandemic conditions.
What happens to the contract when force majeure is successfully invoked?
The consequences depend on the clause’s specific terms. Some force majeure provisions excuse performance temporarily while the event persists, with the obligation resuming after the event ends. Others allow either party to terminate the contract if the force majeure event continues beyond a specified period. Still others provide only for an extension of performance deadlines. The relief available is limited to what the clause specifically provides.
Can a party invoke force majeure if it was already in default before the event occurred?
Generally no. Courts have consistently held that a party cannot invoke force majeure to excuse a pre-existing default. If a contractor was already behind schedule before a hurricane struck, the contractor cannot use the hurricane to excuse the entire delay — only the portion caused by the storm. Pre-existing defaults and force majeure events are analyzed separately.
Is a price increase or supply shortage sufficient to invoke force majeure?
Rarely. Economic hardship, increased costs, and market disruptions are generally not sufficient to invoke force majeure unless the clause explicitly covers market disruptions or the price increase or shortage makes performance literally impossible rather than merely more expensive. Courts treat contracts as allocating economic risk between the parties, and mere price volatility is typically within the range of commercial risks each party accepted.
What should businesses include in force majeure clauses going forward?
Post-pandemic drafting practice has evolved significantly. Businesses should consider specifically enumerating pandemic, epidemic, and public health emergency events; government-mandated closures and restrictions; supply chain disruptions from specified causes; and detailed notice, mitigation, and termination trigger provisions. Both parties should also consider whether to include hardship clauses that require renegotiation when extraordinary circumstances make performance commercially impractical, providing an alternative to outright excuse.
