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What Is Force Majeure?

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Author: Sarah Nadon – Law Student Edited By: Ryan Carson

Since March 11, 2020 when the World Health Organization deemed the outbreak of Covid-19 a global pandemic, many situations arose where businesses could not offer full services and clients were dissatisfied as they saw this as not fulfilling a contractual obligation.  

Force majeure is a standard clause in contracts that allows both parties to be freed from liability or obligation when circumstances arise that are beyond the control of either party. These events can include war, pandemics, or an event described by the legal term act of God.

A well-expressed definition of a force majeure is found in the Supreme Court of Canada decision of Atlantic Paper Stock Ltd. v St. Anne-Nackawic:

“An Act of God clause or a force majeure clause … generally operates to discharge a contracting party when supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected something beyond reasonable human foresight and skill”.1
During the current Covid-19 pandemic, many people are unable to meet and perform their obligations. Does this automatically mean that the doctrine of force majeure excuses all obligations?

The short answer is no. In order for one’s obligations and duties to be excused by force majeure, the contract of the individual must have an applicable force majeure clause. Even if a force majeure clause is present, most are drafted broadly so that parties have to argue what events fall under the clause. Contrary, some clauses provide a long list of events that fall under force majeure. Many clauses indicate “acts of God” however, there is very little case law that supports what an act of God is.

The first question that needs to be asked is whether the force majeure event directly impacted the individual’s ability to perform their obligation and duties. A well-drafted force majeure clause should include a requirement that the party invoking the clause provide written notice of the force majeure to the other parties included in the contract. If the force majeure clause is relied upon, the party claiming force majeure will be required by the contract to give notice that the clause is being invoked as soon as they become aware that they plan to rely upon that clause. If for any reason, there is no specific notice period, they must provide notice that is reasonable. 
The careful drafting of a force majeure clause will note what type of contract it is placed in and will help minimize potential litigation. A Force Majeure clause is put in contracts to protect parties from events that do not typically occur during everyday life; therefore, when drafting a force majeure, it should address three specific questions:

          • How broad should be the definition of triggering events;
          • What impact must those events have on the party who invokes the clause; and
          • What effect should invocation have on the contractual obligation? 2

Again, when drafting the clause, many lawyers opt to use broad lists while others rely on all-inclusive and descriptive events. The force majeure clause is more than a boilerplate as it helps protect parties to a contract and avoids putting parties at risk of having a court interpret a contract. Even if a contract does not have a force majeure clause, there are still circumstances where the principle of frustration may apply. 

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The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting members of Carson Law, Carson IP, or their own legal counsel regarding any specific legal issues. Carson Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site. The articles published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.

References

1 Atlantic Paper Stock Ltd v St Anne-Nackawic Pulp and Paper Co, [1976] 1 SCR 580, [1976] 1 RCS 580
2 Atcor Ltd v Continental Energy Marketing Ltd, [1996] AJ No 131, [1996] 6 WWR 274, 38 Alta LR (3d) 229, 178 AR 372, 25 BLR (2d) 1, 61 ACWS (3d) 75