Force Majeure: what does it mean, why is it important to businesses, and how do we use it at LinkSquares as a Smart Value? Let’s dive in.
Legal Definition: A contract provision that frees both parties from obligation if an extraordinary event prevents one or both parties from performing. These events must be unforeseeable and unavoidable and not the result of the defendant’s actions. Hence they are considered ‘an act of God.’ - WEX Law Dictionary.
Case Law Example: In re Hitz Rest. Grp.- 616 B.R. 374 (Bankr. N.D. Ill. 2020), a restaurant was excused from paying rent to their landlord based on the state governor’s COVID-19 executive order restricting restaurants from serving customers. The landlord argued the restaurant was not paying rent due to a lack of funds. The court found that the restaurant was not paying the landlord due to a Force Majeure event triggered by the governor’s order.
Why Now: Force Majeure was always considered boilerplate contract language but was largely glossed over as a situation that almost never happened. With the pandemic, companies were suddenly scrambling to read the Force Majeure clauses in their contracts and examine the applicability. There is even discussion about adding language specific to “pandemic” or “quarantine” to future iterations.
Force Majeure at LinkSquares: LinkSquares has a trio of Force Majeure Smart Values including:
Force Majeure - A provision that excuses a party from its contractual obligations due to an event that the parties could not have anticipated or controlled. Full Clause Extraction
Force Majeure Exception - Are there exceptions within the Force Majeure Clause? For example, payment or inclement weather. True/False Result
Force Majeure Termination - Can a party terminate the contract if the other party’s performance continues to be adversely affected for a certain period of time? True/False
Today’s Takeaway: Force Majeure is becoming a “must-have” language for businesses, and LinkSquares provides a crucial solution for our customers - extracting this language for easy analysis.
Want to learn more about how LinkSquares can help your business handle Force Majeure clauses? Schedule a demo today.