(4.6 Update) Implications of Force Majeure (Act of God) to contract adherence
Implications of Force Majeure (Act of God) to contract adherence (lease payments and other commitments)
Note: The following is not intended, and should not be construed as, legal advice. Ceterus strongly encourages our customers to seek qualified legal assistance on this and all relevant legal matters.
"Force majeure" translates literally from French as "superior force”. Force majeure is commonly understood to refer to “Acts of God” or, more basically, events which can not be anticipated or controlled. In contract law, “force majeure” provisions can be used to excuse non-performance of a party.
If you are looking to understand the impact of Covid 19 on your obligations under contracts and loan agreements, we found this article to be helpful because it provides this practical advice:
Force Majeure provisions are often in lease agreements but can exist in other other commercial contracts (like loans or services or supply contracts).
As a first step, read through the contract (including security agreements and promissory notes for a loan) to determine whether it contains a force majeure clause. If it does, review its language closely.
Even without a specific contract provision covering force majeure, common law of contracts has similar concepts which may support the suspension of performance obligation for reasonable duration of event and circumstances. State-by-state, some differences in how case law apply so (again) seek competent legal counsel.
Pay close attention to any requirements in your agreements related to notice; you may owe the other party written notice within a defined period of time should you wish to delay performance.
Our advice: read your contracts and stay in communication with lessors and creditors, demonstrating transparency and good faith.