More Thoughts About Force Majeure Provisions

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Last week, we wrote about a court decision interpreting a lease’s poorly written force majeure clause. If you missed it, click: HERE to see it. Following that blog’s posting, we engaged in some “off-line” discussions with old friends about the scope of force majeure provisions. Basically, our back-and-forths concerned their scope: “Should they be broad or narrow?” Today’s posting is an outgrowth of those discussions.

Our position last week was that these provisions are “catch-alls,” i.e., they usually cover situations beyond the control of the parties. These clauses usually begin with: “If A, B, C, …, Z,” examples being labor strikes, meteorite crashes, etc. Then the clauses end with: “or other events beyond the reasonable control of a party.” The keyword is “other.” That tells us that A, B, C, and so forth are examples of things beyond the reasonable control of a party. They (A, B, C, etc.) don’t have to be listed. That is if people would agree that they are such.

One understanding of a text that goes from the “particular” to the “general” is that the statement means the generalization (in our case, “beyond the reasonable control”) covers all such events. In education, this format is used when a teacher begins a lesson with examples that lead to a general rule. In contrast, when a generalization precedes the list of specifics, the “interpretation” is that the specifically listed items act to “limit” the generalization. Unfortunately, with so many people (all of us included) not “knowing” these two rules of interpretation, they aren’t very effective ones. That deficiency allows us to argue about what such lists mean. In the case of a force majeure clause, that conundrum manifests itself as follows. If a particular happening is “dicey” and wasn’t specifically listed in the text, the parties line up on opposite sides of the river and shoot at each other. That’s one reason why, whenever a unique situation becomes common such as “the” pandemic, there is a rush to add that word to the list. The same goes for “government-enforced closings.”

Another “learning” we are now getting about this (formerly) boilerplate provision is that the remedy in a force majeure clause is a generalized one: “What should happen when the bad thing happens?” In the general case, it is that the “bad” thing triggers a permitted delay or “tolls” a time-bound obligation. [Definition of “tolling”: to delay, suspend or hold off the effect …] As an example, if a party is obligated to complete construction by a given date and an industry-wide labor strike or a hurricane actually stops the work for 10 days, then the required completion date would be “pushed” by 10 days. In regions where unions are absent and no hurricane has ever landed, the simple “beyond the control” language will suffice. But, where hurricanes are common or labor unions “rule,” the parties can more easily predict the issues or disagreements that might arise. For example, is limited availability of labor (as contrasted with the unavailability of labor) beyond the reasonable control of a party? How great a premium should a party be obligated to pay for labor or materials? What about a local labor stoppage? Did the party cause it or did that party just become a target being used by a union to force an industry concession? For reasonably cognizable situations, it would be wise to list them, not as a limitation of the generality: “beyond the reasonable control rule, but as elaborations on specific examples.

But, if the general relief under a force majeure provision is to toll a party’s obligation, does that work when it comes to the obligation to pay money (most often rent) by a given date? Should all previously owed money become immediately payable when a government-ordered closing rule is lifted? When does a pandemic end? Is it when it feels that way or is the WHO the arbiter? In 2020, these issues have been exposed. Basically, shoehorning rent relief (be it delaying the obligation or modifying the obligation) into a general force majeure provision doesn’t seem like the proper approach. Ruminations believes that agreements need two different force majeure clauses. The traditional one should be limited to situations that call for tolling – delaying the obligation. The “new” one (or ones) should deal with situations that modify an obligation. The prime example would be describing the general situations that would lead to change (permanently or temporarily) an obligation, such as the rent obligation, and listing interpretive examples of those general situations.

On a concluding note, Ruminations thinks a lot of us don’t realize that our leases and other agreements almost always contain a “second” force majeure provision. Here is an example, one that we offer as the conclusion to today’s posting because our readers are smart enough to understand our point without our using a hammer to drive the point home.

The foregoing notwithstanding if any default by Tenant occurs other than in the payment of money, and such default cannot reasonably be cured within a period of 30 days, and Tenant, prior to the expiration of such period, commences to cure such default, then Tenant will have such longer period as is reasonable to cure such default, and Landlord will not have the right to declare the Term ended or relet the Demised Premises, or otherwise exercise any right or remedy by reason of such default.

[Again, we don’t offer the cited clause as one to be used. There is a myriad of ways this lease provision can be written. We only offer this one to illustrate a general concept.]


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