When enter a contract with someone in Ohio, you expect them to comply with its terms. But, in some cases, unforeseen circumstances like a pandemic, political unrest or natural disasters may disrupt the fulfillment of a contract. In such situations, a force majeure clause will come into effect.
Overview of force majeure
A force majeure clause is a provision in a contract that excuses non-performance in case of unexpected events that are beyond the control of the parties involved. Most contracts provide that the parties involved may extend the performance period, compensate for the lost time or terminate the contract without penalties or liabilities.
Requirements for a valid force majeure clause
The purpose of a force majeure clause in a contract is to alleviate the parties from liability when unforeseen circumstances occur. Therefore, for it to be valid:
- It should clearly outline the events that will trigger its activation.
- The events listed in the clause must be unpredictable at the time of contract formation.
- The triggering event must directly cause non-performance or delay in performance.
- The party affected by force majeure must take reasonable steps to mitigate or minimize the impact of the event on their performance.
Force majeure vs. pacta sunt servanda
The force majeure clause often conflicts with the principle of pacta sunt servanda. This means “agreements must be kept.” This principle is a fundamental aspect of contract business law, and it states that parties bound by their agreements must fulfill their obligations.
However, in cases where a force majeure event occurs, the party affected may argue that they cannot perform the contract due to unforeseen circumstances beyond their control. This can lead to a conflict between the two principles, as one places importance on honoring agreements while the other allows for exceptions in case of extraordinary events.
In a world where natural disasters, wars, and pandemics have become more prevalent, force majeure clauses hold great significance. However, it is crucial to meticulously draft and negotiate these clauses to ensure fairness for both parties involved. There are people who can exploit or abuse these clauses, making it difficult for the other party to enforce their rights.