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Force Majeure is a French term meaning
known as ‘ black swan ’ events or generically
superior force . It is also a contract clause that relieves parties from performance when an extraordinary event occurs . Such challenges ,
‘ Acts of God ’, may be mitigated by a force majeure clause acknowledging that contracts can ’ t be fulfilled when issues are outside of everyone ’ s control .
Did the Coronavirus arise from bat soup in a filthy , fetid wild animal market ? Or was it accidentally leaked from China ’ s national biology lab in Wuhan ? It doesn ’ t really matter . It is a superior force that was not foreseeable . ( Although some would argue that with so many novel infectious diseases arising over the last 20 years , epidemics should now be expected ).
With that last thought in mind , going forward , you should work with your attorney to include specific force majeure provisions in your contracts . A well drafted clause may excuse performance during events that are beyond the reasonable control of the parties . These can include acts of terrorism , labor shortages and strikes , new government regulations , fire and floods . Events such as epidemics , pandemics , biological outbreaks and wide spread illness should now also be incorporated into force majeure clauses .
What if your current contract does not include such language or the event doesn ’ t trigger a force majeure clause ? Your fall back position is the doctrine of “ frustration of purpose .” This doctrine can excuse contractual performance if events have now made it impossible to perform , or the central purpose of the contract has been frustrated due to unforeseeable events . However , Courts do not favor upending contracts under this doctrine . You are better off relying on a well drafted force majeure clause .
It is interesting to note that a Chinese agency is issuing force majeure certificates to local companies unable to perform on their contracts due to the Coronavirus challenge . It would be nice to just wave a certificate and make all the issues go away . But in the United States and other common law countries , force majeure is a question of fact for the Court . Was the event reasonably foreseeable ? Were any notice provisions complied with ? Does prior case law shed any light on the current situation ? These are all facts to be considered . A government certificate won ’ t work here .
Still , your Chinese counterpart is probably struggling even more than you are . Is litigation even advisable ? And if so , could you even collect ?
The bigger issue for everyone is to understand the nature and need for force majeure clauses in your contracts . Well , that and the need for alternate sources of supply outside of China .
GARRETT SUTTON , ESQ
Garrett Sutton is an attorney , speaker and best selling author . As part of Robert Kiyosaki ’ s Rich Dad ’ s Advisor group he has written six books which have been translated into 11 languages . Garrett focuses on corporate and asset protection law and speaks to audiences on the importance of asset protection . His advice is pertinent , timely and valuable .
Garrett received his Juris Doctor Law Degree in 1978 from Hastings College of the Law , the University of California ’ s law school in San Francisco . He received a B . S . in Business Administration from the University of California , Berkeley , in 1975 . He is licensed to practice in Nevada and California .
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