On October 7, 2007, the Dow Jones Industrial Average stood at 14,164. Less than 18 months later, it closed at 6,547. In that time, stocks lost $11.2 trillion, and the U.S. economy shed over 8.8 million jobs. This “Great Recession” was the worst by many measures since the Great Depression, and succeeded in completely erasing all of the jobs gained in the previous economic expansion. Out of this event came several lawsuits that threatened to change the historical interpretation of force majeure clauses. The lawsuits attempted to make global economic events fit within the force majeure provisions, and thus avoid contractual obligations. Thus far, courts continue to resist applying this contractual provision to even the most severe economic events. Nevertheless, courts have indicated a willingness to consider recessions as force majeure events if the parties intended such events to be covered by their contracts.
Force Majeure After the Great Recession
Recent cases seeking to avoid obligations based on the Great Recession were not the first to argue that economic downturns constituted force majeure. Courts, however, previously rejected the notion that economic downturns could void contractual obligations. From the 1986 oil crisis that saw oil prices drop 75 percent to the crisis in the tourism industry that followed 9/11, courts have consistently held that “[a] force majeure clause is not intended to buffer a party against the normal risks of a contract.” Against this backdrop, it is unsurprising that most recent attempts to invoke these clauses and avoid contractual obligations have failed. A few of the cases are summarized below and indicate that courts remain hesitant to read force majeure clauses to include broader economic turmoil—and in some instances, refuse even when the clause’s language appears to encompass such events.
