A “force majeure” clause in a trademark license agreement or other contract accounts for “acts of God.” It can relieve a party from having to perform under the agreement when an unforeseeable event, like a natural disaster, prevents it from doing so. Whether and to what extent particular contract language applies to a given situation can be a tricky call.
Our friends at Perkins Coie offer a timely analysis of force majeure provisions in the context of the coronavirus crisis. It’s a good means to determine where you (or a contracting party) might stand given the current state of the world.
The place to start in interpreting any contract is with the contract itself. Usually, words are given their ordinary meanings. Therefore, the more force majeure language seems to apply to the coronavirus, the more likely it will control. Beyond this principle, you’ll have to consider how courts in the governing jurisdiction have applied the doctrine.
“Although oft-ignored as boilerplate language, careful review and negotiation of force majeure provisions is necessary to ensure that a party—particularly the party that will be the primary provider of services under the agreement—is protected from situations outside of its control. A typical provision (1) lists certain types of outside events that are agreed to potentially excuse a party for nonperformance, and (2) provides that a party’s nonperformance due to such an event will be excused, at least for the duration of the triggering event.”
The authors write that “[w]here a party invokes a contract’s force majeure provision to excuse its obligation to perform under the contract, the success of such excuse depends on the obligations at issue, the precise wording of the provision, the specific outside event that is alleged to have triggered the provision, and the variations in contract interpretation rules under governing law. In some situations, an outside event may allow the affected party to delay its performance, but in other situations, the outside event may release such party from all of its unperformed obligations under the agreement.
“Under most force majeure provisions, the mere occurrence of a force majeure event will often be insufficient to excuse a party’s performance of an obligation; rather, depending on the precise wording of the provision, the force majeure event must somehow prevent, make impossible, make impracticable, or delay the party’s performance. In other words, the force majeure event must be the cause of the party’s inability to perform. Further, if the force majeure event affects some, but not all, of the party’s obligations, the unaffected obligations most likely remain in effect unless the provision expressly provides otherwise.”
Good thoughts. Another helpful article is accessible here.
Stay safe out there! Including when deciding whether force majeure excuses performance under a contract.