[Updated 15 May 2022 to aadd “in the first sentence of ” to section 12.4(a).]
[Updated January 18, 2014, to add to 12.4(b) “or other change in general economic conditions”.]
[Updated yet again August 24, 2013, to reflect further comments emailed me by A. Wright Burke.]
[Updated August 20, 2013, to reflect changes prompted by A. Wright Burke’s comment.]
[Updated July 31, 2013, to reflect the comment by “Uninterested Observer.”]
[Here’s the latest and greatest:
12.4 Force Majeure. (a) If a Force Majeure Event prevents a party from complying with any one or more obligations under this agreement, that inability to comply will not constitute breach if (1) that party uses reasonable efforts to perform those obligations, (2) that party’s inability to perform those obligations is not due to its failure to (A) take reasonable measures to protect itself against events or circumstances of the same type as that Force Majeure Event or (B) develop and maintain a reasonable contingency plan to respond to events or circumstances of the same type as that Force Majeure Event, and (3) that party complies with its obligations under the first sentence of section 12.4(c).
(b) For purposes of this agreement, “Force Majeure Event” means, with respect to a party, any event or circumstance, whether or not foreseeable, that was not caused by that party [(other than a strike or other labor unrest that affects only that party, an increase in prices or other change in general economic conditions, a Change in Law, or an event or circumstance that results in that party’s not having sufficient funds to comply with an obligation to pay money)] and any consequences of that event or circumstance.
(c) If a Force Majeure Event occurs, the noncomplying party shall promptly notify the other party of occurrence of that Force Majeure Event, its effect on performance, and how long the noncomplying party expects it to last. Thereafter the noncomplying party shall update that information as reasonably necessary. During a Force Majeure Event, the noncomplying party shall use reasonable efforts to limit damages to the other party and to resume its performance under this agreement.
In an initial fit of enthusiasm I consolidated subsections (a) and (b), but I was persuaded by Chris Lemens’s comment to reverse course. Then A. Wright Burke took over and politely but firmly prevailed upon me to eliminate all sorts of other crud. Here are the gory details:
- I omitted from the beginning of subsection (a) the phrase “If a Force Majeure Event occurs” and changed the following reference to “that Force Majeure Event” to “a Force Majeure Event.”
- I omitted from subsection (a) the carveout for an obligation to pay money. A similar carveout is included in the definition of “Force Majeure Event,” and that carveout addresses the issue more accurately. And having both carveouts would likely lead to confusion, even with my explanation that if you want to address the issue, you should include only one carveout.
- In the first sentence I changed the passive voice to active voice.
- I changed “performing” to “complying” (see MSCD 3.138). Follow your own guidelines, Adams!
- I changed the concept of a party’s not being required to perform to “that failure to comply will not constitute breach.” That’s far more logical.
- In clause (1) of subsection (a), I changed “used” to “uses.”
- In clause (2), to avoid unnecessarily invoking causation, I changed “of the sort that gave rise to that Force Majeure Event” to “the same type as the Force Majeure Event.
- I revised the definition of Force Majeure Event by adding at the end “and any consequences of that event or circumstance.” If a pipeline ruptures, the problem might not be the rupture but the weeks required to do repairs and cleanup.
- I got rid of the defined term “Nonperforming Party,” using instead “that party” and “the noncomplying party.”
- In subsection (c), I replaced “Upon occurrence of a Force Majeure Event” with “If a Force Majeure Event occurs.” Abstract nouns bad, verbs good!
But I don’t expect that this is the end of it!]
***
In this post and this post I offered, and noodled with, a force majeure provision. Here it is again, with a couple of tweaks:
12.4 Force Majeure. (a) If a Force Majeure Event occurs, the party that is prevented by that Force Majeure Event from performing any one or more obligations under this agreement (the “Nonperforming Party”) will be excused from performing those obligations, on condition that (1) the Nonperforming Party used reasonable efforts to perform those obligations, (2) the Nonperforming Party’s inability to perform those obligations is not due to its failure to take reasonable measures to protect itself against the event or circumstance giving rise to the Force Majeure Event, and (3) the Nonperforming Party complies with its obligations under section 12.4(c).
(b) For purposes of this agreement, “Force Majeure Event” means, with respect to a party, any event or circumstance, regardless of whether it was foreseeable, that was not caused by that party and that prevents a party from complying with any of its obligations under this agreement [(other than an obligation to pay money)] [(other than an event or circumstance that results in a party’s not having sufficient funds to comply with an obligation to pay money)], except that a Force Majeure Event will not include [a strike or other labor unrest that affects only one party, an increase in prices, or a Change in Law].
(c) Upon occurrence of a Force Majeure Event, the Nonperforming Party shall promptly notify the other party of occurrence of that Force Majeure Event, its effect on performance, and how long that party expects it to last. Thereafter the Nonperforming Party shall update that information as reasonably necessary. During a Force Majeure Event, the Nonperforming Party shall use reasonable efforts to limit damages to the other party and to resume its performance under this agreement.
What’s different about this version? Only the following: The new clause (1) of subsection (a) contains what had been part of the definition of “Force Majeure,” in section (b). And in response to comments to my original posts, I added clause (2) to subsection (a). As previously, the bracketed language in section (b) includes some possible carveouts.
Ken,
Why not define a “force majeure” event in (a) rather than (b), then specify what happens when a force majeure event occurs in (b) rather than (a) and keep (c) where it is? It seems easier to follow when the definition comes first.
Bradley
As a general rule, I don’t find it helpful to give people definitions, then the provisions that use those definitions. Context matters when you read definitions: if you read them in a void, it lends uncertainty to the exercise.
I generally agree (especially with definitions at the front of the contract) but I think here it helps the flow IMHO.
I’ve been defining force majeure events as those that are “outside the reasonable control” of a party, instead of, as you put it, those “that [are] not caused by that party”. I like your wording better because it narrows the issue (in that specific phrase) to causation. I’m trying to think of why I wouldn’t just adopt your language but can’t think of any value my language has over yours. Do you see anything that I would lose from language that launched us into the no man’s land of reasonableness and control?
There are whole fields of philosophy devoted to understanding the nature and meaning of causation, and 2,500 years after Aristotle they still don’t have an answer. So pity the poor judge who is asked to decide. I don’t think the courts really like the concept in general, and they moved away from it in determining remoteness of damage (certainly in England?) because it can have so many meanings and caused (heh) so many problems.
Courts don’t mind “reasonable” though, because they feel they have a better idea of how it applies to the real world. (Although “reasonable control” might be hypallage – it is not actually the control that needs to be reasonable, but perhaps that a reasonable person would expect a party to be able to exercise control, or something similar.)
I’ll have to lie in a darkened room thinking about this. But for now, note that the conditions stated in clause (2) of subsection (a) go some way to addressing the notion of a party contributing to the problem by failing to prepare.
If a FM event continues for some specified period of time,
the other party should have a right to terminate the contract or suspend payments while the FM event continues. This can be added to the termination section too.
If a FM event excuses a party’s performance for services provided for a term, then the term should be extended at no additional cost for the period of time that a FM event continues. For prepaid services, I sometimes ask for a refund for the period of the FM Event.
Some obligations should not be excused as a result of a FM Event (e.g., confidentiality/data security obligations, indemnification defense). I typically would not include payment of money unless it extends for some period of time (i.e., if my bank has a problem with processing a payment, I do not want to be in breach).
The other party should be excused from its obligations too, to the extent the other party’s performance is affected by the Nonperforming Party’s claim of a FM event.
Finally, in 12.4(a)(1)-(3), I’d replace “party” with Nonperforming Party, and I would delete each instance of “that” at the beginning of each clause.
Thank you for these thoughts.
Your first and second points could indeed be reflected in an FM provision. I might include your first point in a draft I’m working on now; if I do, I’ll add that language to this post.
Regarding your fourth point (excusing the other party’s performance), I don’t think one needs to say that, but I’ll check.
And your closing point of course makes perfect sense, so I’ll make those changes.
Here’s my pass at slimming the provision and minimizing defined terms:
12.4 Force Majeure. (a) If a party cannot comply with one or more of its obligations under this agreement due to one or more foreseeable or unforeseeable events or circumstances not caused by the noncompliant party, each such noncompliance will be excused if the noncompliant party (1) used reasonable efforts to comply and to protect against the events or circumstances that caused the noncompliance and (2) gives the other party the notice and updates required by section 12.4 (c).
(b) Section 12.4 (a) will not excuse any noncompliance with an obligation to pay money or any noncompliance caused by one or more of the following: a strike or other labor unrest that affects only one party, an increase in prices, or a Change in Law.
(c) Whenever a party cannot comply with one or more of its
obligations under this agreement, the noncompliant party shall (1) promptly notify the other party of that fact and the nature and expected duration of the noncompliance, (2) update that information as reasonably necessary, and (3) use reasonable efforts to limit damages to the other party and resume compliance with this agreement.
Ken:
A few thoughts, though I don’t feel all that strongly about them.
First, I preferred the version that put the operative provision first. It was shorter and much easier to digest. Most people who get all the way to the force majeure clause already have an idea of what a force majeure event is. They are willing to work with the defined term as an approximation until they get to the later definition. Parsing through the version that put them together was just too much work.
(By the way, in that version, if you have listed three conditions, shouldn’t you introduce them with “on the conditions that” — that is, plural, not singular?)
Second, I’ve always wondered what would happen if a force majeure event prevents someone from giving the notice that is required for an event to be recognized as a force majeure event. After all, these provisions only come into play in the very rare situation where something truly unpredictable has happened; who knows what that might be? This could especially be the case where the parties can only agree on notice going by US mail, for example. What if the US postal service is also down? So, I usually either condition this kind of obligation with something like “to the extent reasonably possible under the circumstances” or simply make it an obligation and not a condition, so that rules about impossibility come into play.
Finally, it seems to me that changes in law usually ought to be force majeure events if they have the effect of preventing performance. The force majeure clause should not excuse performance where the events don’t prevent performance, so the usual argument that the performing party ought to bear the risk of additional costs seems irrelevant to me. If additional cost could fix the problem that the change in law presents, then it wouldn’t be force majeure. When I don’t care enough about a list-based force majeure clause to actually fix it, I sometimes add “acts of God or government” because I like the turn of phrase.
Chris
Ken:
I forgot one thing. The term “force majeure” itself. I’m highly prejudiced against law-French, even more than law-Latin. Can we not just title this section “Excused Performance” and the event an “Excusable Cause” or something?
Chris
Yes, it’s not a great phrase. But I suspect that we’re stuck with it.
OK, I took two steps forward, but I’ve now taken one step back and reverted to the three-subsection format.
“On condition that” is a set phrase.
Yes, I find myself asking all sorts of questions about force majeure. It’s an awkward concept that is now used way too broadly.
Is “to the extent reasonably possible under the circumstances” implicit in “promptly”? If not, then “promptly” encompasses things not reasonably possible.
I think the new version should still be deemed a work in progress at 288 words.
I took another pass at it and came up with something different from my previous one. It’s at the foot of this comment. This one is only 199 words.
It broadens the noncomplying party’s duty to notify and mitigate to any noncompliance, not just force majeure. Why limit those duties to force majeure?
It gets rid of “force majeure event,” since force majeure is an event, and MSCD counsels against redundancy. Actually, it gets rid of “force majeure” altogether, on the theory that it’s jargon and therefore bad.
It gets rid of two defined terms, making the section easier to read.
It speaks in terms of “complying with” obligations rather than “performing” obligations, since strictly speaking, you don’t perform obligations, you perform the things obligations require.
I’m shaky about the numbered clauses, since they are full sentences and thus don’t comply with the MSDC scheme, but the better solution hasn’t yet occurred to me.
Anyway, professing only to be a work in progress, here goes:
12.4 Force Majeure. (a) A party’s noncompliance with one or more of that party’s obligations under this agreement will not constitute a breach if the following conditions are met for each such noncompliance:
(1) The noncompliance was not caused by the noncomplying party or the noncomplying party’s failure to take reasonable measures to protect against or respond to events and circumstances of the sort that gave rise to the noncompliance;
(2) The obligation was not an obligation to pay money;
(3) The noncompliance was not caused by an increase in prices, a change in law, or a strike or other labor unrest that affects only one party; and
(4) The noncomplying party complies with its obligations under section 12.4 (b).
(b) When a party fails to comply with one or more of its obligations under this agreement, or reasonably anticipates such noncompliance, the noncomplying party shall do the following:
(1) promptly notify the other party of the noncompliance or anticipated noncompliance and the actual and expected duration and effects of each noncompliance;
(2) update that information as reasonably necessary, and
(3) use reasonable efforts to limit damages to the other party and to resume compliance with the agreement.
Ahem. Smooth move by yours truly. Done.
I think these are deal-specific issues, so they’re beyond the scope of the very general language that I’ve offered.
Ken, this is all great stuff (as usual). But isn’t there a disconnect between (a) and the end of (c)? Under (a), the party is excused performance of its obligations. Under (c), the party is to use reasonable effort to resume performance but only during the FME. This seems to result in the party still benefitting from the exemption on performance once the FME has ended.
Although you find it clunky to do so, it might be clearer to say that the party is only excused performance while the FME continues.
BTW, I find your use of “excused from performance” a much better phrasing that the usual “not liable for” as it addresses the issues of both damages and termination. The right to terminate for a continuing FME can then be addressed as a separate issue.
Anyway, all of this has lead me to re-write my standard force majeure clause. It’s not as detailed as yours, but it comes in at a satisfying 136 words (including definition and optional extras). Happy to send it to you if you are interested.
Thanks!
Mark
I’m pleased you found this useful. Once I have some brain space available, I’ll give this some thought.
Have you thought of revisiting this clause as issues of global pandemic have come front and center?
No, but I recently did this post: https://www.adamsdrafting.com/force-majeure-in-the-time-of-coronavirus/. I’ll put a link to it at the top of this post.