This force majeure clause includes a list of events that will excuse a party’s non-performance, as well as a provision covering “any cause beyond the reasonable control of such party.” In general, courts tend to interpret such a provision in light of the events that the force majeure clause specifically lists. For example, in a case in which the events listed in a force majeure clause pertained only to the party’s ability to conduct the day-to-day operations of its business, the U.S. Court of Appeals, New York, held that the catch-all provision in the force majeure did not cover a non-performing party’s inability to obtain required insurance. Kel Kim Corp. v. Central Markets Inc., 519 N.E.2d 295, 297 (Ct. App. N.Y. 1987). In light of this holding and others like it, it is especially important for the parties to give due consideration to the force majeure clause’s list of specific events that will excuse a party’s non-performance.
Almost every force majeure clause includes the following on its list of specific events that will excuse a party’s non-performance: fire, flood, war and “acts of God,” the conventional definition of which is an “act occasioned exclusively by forces of nature without the interference of any human agency.” Black’s Law Dictionary (6th ed. 1990). The customer in an outsourcing or ASP agreement may wish to limit the scope of such terms, however, if the vendor’s non-performance would disrupt the customer’s business substantially. For example, a force majeure clause in a recent outsourcing contract stated the following:
Vendor shall not be responsible for failure or delay in performance hereunder by reason of severe fires and floods (in each case caused by reasons outside the reasonable control of Vendor), war or severe acts of God.
By requiring that, to excuse the vendor’s non-performance, fires, floods or acts of God must be “severe,” this provision suggests that a power failure or road closure caused by an ordinary storm would not excuse the vendor’s non-performance.
Many customers often oppose the inclusion of “strikes” and “labor disputes” in the force majeure clause’s list of events excusing the vendor’s non-performance. When they consider this issue, customers should consider whether they would deem it unreasonable if, for example, they were unable to access their computer desktops because of a strike by their vendor’s employees.
Customers also should consider whether the vendor’s subcontractor’s non-performance should excuse the vendor’s failure to perform its contractual obligations. The generic force majeure clause quoted above does not squarely address this issue. Although a court is unlikely to hold that a subcontractor’s non-performance falls within the catch-all provision, customers would be wise to expressly exclude this event from the scope of a force majeure clause’s protection by inserting the following language:
“. . . provided, however, that non-performance by the vendor’s subcontractors shall not excuse any delay or failure in performance by the vendor.”
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