(908)402-4770Force majeure clauses are an important part of any business contract, but they’re often misunderstood. These clauses outline what parties can do if certain extenuating circumstances occur that make it impossible for them to fulfill their contractual obligations. The enforceability of force majeure clauses in New Jersey depends on how well the clause is written and how it fits into the context of the entire contract.
What Is a Force Majeure Clause?
A force majeure clause is a contract provision that allows one or more parties to suspend or end his performance obligations because of unforeseeable events beyond his control. The term force majeure literally refers to a “superior force” that is “neither anticipated nor controlled.” New Jersey Dept. of Envtl. Prot. v. Bayshore Reg’l Sewerage Auth., 340 N.J. Super. 166, 168 n.1 (App. Div. 2001).
A force majeure clause provides a means by which parties to a contract can expect and agree upon in advance certain uncontrollable events that will render performance impracticable. The clause further conditions a party’s obligation to perform upon the non-occurrence of such enumerated events. Facto v. Pantagis, 390 N.J. Super. 227, 231-32 (App. Div. 2007).
Such events might be floods, fires, hurricanes or other “acts of God.” Other events which a force majeure clause might cover would be acts of war or terrorism, labor strikes, pandemics, government actions, etc.
The goal of these clauses is to protect all parties by freeing them from their contractual obligations when such events occur and make it impossible for the affected party(ies) to perform. For instance, in Facto, the Appellate Division upheld the dismissal of a newlywed couple’s breach of contract claim against a catering hall, which, less than an hour into their wedding reception, was evacuated due to a power outage. The power outage was caused by widespread flooding. Id. at 229- 32.
What Happens When a Party Enforces a Force Majeure Clause?
Enforcement of a force majeure clause ordinarily relieves both parties of their obligations to perform. Facto, 390 N.J. Super. at 233- 234.
But sometimes a performance-inhibiting event occurs that none of the parties expected. In that case, when the force majeure clause in a contract does not reference a specific event, New Jersey courts construe force majeure clauses narrowly to include “only events or things of the same general nature or class as those specifically enumerated.” Seitz v. Mark-O-Lite Sign Contractors, 210 N.J. Super. 646, 650 (Law Div. 1986).
What if There is No Force Majeure Clause?
The common law defenses of impracticability, impossibility and frustration of purpose may provide useful backstops for contracts lacking a force majeure clause or for unforeseeable circumstances that are not specifically stated in the clause. These long-recognized defenses “excuse… a party from having to perform its contract obligations, where performance has become literally impossible, or at least inordinately more difficult, because of the occurrence of a supervening event that was not within the original contemplation of the contracting parties.” JB Pool Mgmt. v. Four Seasons at Smithville Homeowners Ass’n, 431 N.J. Super. 233, 246 (App. Div. 2013).
Indeed, the Facto court noted that absent a force majeure clause, they still would have excused performance by the caterer because of impracticability. The court pointed out the area-wide blackout was outside the control of the catering hall. Additionally, without electricity, there was no music, no photos or videos, and no air conditioning for the wedding, which took place on a hot summer day in August. 390 N.J. Super. at 233.
Enforceability of Force Majeure Clauses in New Jersey
When evaluating whether a force majeure clause is enforceable in New Jersey, there are several factors a court will consider. Foremost, the language of the clause itself must be clear and unambiguous; vague terms like “unforeseen circumstances” will not suffice.
The clause should also list specific events (i.e., natural disasters or labor strikes) that could trigger performance suspension or termination. New Jersey courts require this specificity so that each party understands what types of situations would qualify as a “force majeure event” under the contract.
Finally, the clause should define how long suspension or termination can last before either party has to renegotiate the agreement or end it outright.
Force majeure clauses can be incredibly useful tools for negotiating contracts in New Jersey and other states across America. However, they must be drafted carefully and properly tailored to fit your individual situation in order for them to be enforced by a court should an issue arise down the line. With careful drafting and attention to detail, you can ensure your contracts are legally binding while still providing sufficient protection against adverse external events that could jeopardize your commitments under the agreement.
What About the COVID-19 Pandemic?
Certainly, the societal and economic disruption caused by the pandemic and related government-imposed lockdowns resulted in the shut-down of businesses and schools, cancelled weddings and vacations, etc.
Facing COVID-19 related circumstances, businesses, corporations, limited liability companies, and individuals may well find themselves on one side or the other of force majeure defenses as they seek to enforce or obtain relief from contractual obligations.
Experienced New Jersey Business Law Attorneys
We have it all in New Jersey. Densely packed cities, sprawling suburbs, bucolic farms.
We also have ocean beaches, ski slopes, forested mountains, and lakes.
And we have hurricanes, blizzards, flooding, labor strikes and Covid-19 lockdowns.
Anyone entering a commercial contract should give serious consideration to having a force majeure clause in the contract.
But you’ll need an experienced New Jersey business attorney to make sure you have a force majeure clause that is right for you and your organization. If you’re entering a deal and want to add a force majeure clause to the contract, reach out to us.
If you are in a contract with a force majeure clause, and you’re not sure how strong it is, call us.
You can reach us in our Scotch Plains office at 908-490-0444 or email us here.