The COVID-19 pandemic is resulting in landlords and tenants closely reviewing a clause in their lease that was long considered unimportant boilerplate. Yes, we are referring to the “force majeure” provision. “Force majeure” is translated from French as “superior strength” and is often thought of an act of God or act of nature. Black’s law dictionary defines it as “a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.” In the coming months many conversations will take place regarding the applicability of the force majeure clause to closures related to the COVID-19 pandemic as well as the related doctrine of impossibility.
A force majeure event is an act that is unforeseen and beyond the reasonable control of the landlord and tenant. Because of the force majeure event, depending on the language in the lease, the parties might be excused from some (but perhaps not all) of the obligations under the agreement. An example could be a storm such as a major hurricane, an earthquake or an act of terrorism. Sometimes the clauses include labor shortages or issues or inability to procure materials, but financial inability is usually excluded. And importantly, rent is usually excluded from the type of obligations that are excused. Force majeure provisions are usually (but not always) pro-landlord and not heavily negotiated. Think of them as the boilerplate that is usually ignored except in large deals where the tenant has more leverage. The language may or may not include pandemics or public health emergencies as an excusable event. A good negotiator might try to include issues relating to failures to obtain building permits.
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