With the world turned upside down at the moment, it’s hard to concentrate on getting the work done that we still can get done. But in the midst of learning the new normal of the moment, we can endeavor to educate ourselves in ways to move forward as best we can, when we can. In that spirit, I offer this column that touches on a little noted and often overlooked clause in nearly every contract, the force majeure clause, that has suddenly received much more attention, given current events.
Boilerplate language can burn you
There is usually a block of clauses in a contract that neither the parties nor their attorneys pay much attention to. They are commonly referred to as “boilerplate” and considered by many to be non-negotiable (but as we’ve stated many times before here, everything, in theory, is negotiable.) They get their nickname after the cast-iron lettering plates that were attached to old water boilers that provided a small amount of never-changing information, like where and when the boiler was made, its capacity, etc. Things that once set down are not going to alter. A metal cast plate attached to a boiler isn’t something you review and want to change that often.
Language in a contract considered boilerplate is rarely altered because, traditionally it all comes from the same paper mill that generates tons of similar contracts, namely legal affairs department’s in large studios or production houses. There’s actually good reason to reuse those clauses beyond complacency.
Writing a clause that is legally sound and effective is a difficult thing. Winning challenges is the only way to really know if what you intended will be upheld and validated by a court. Once a particular way of writing a clause is found that a judge has liked, it is a safe maneuver to never alter that language again and reuse it at every chance you get. Altering even a single word could lead to a different result if challenged in court again, so resistance to change of any kind is strong. Hence boilerplate.
Often it is typeset in a different type face and size (almost always smaller – but not too small where it may be overlooked and unread, as courts have stressed.) It’s set apart to signal to the in-house lawyers, once read in one contract it’ll always be the same in all others.
But they are not always as cast in iron as you’d imagine. Boilerplate language can still be less than perfect and may even be detrimental to the party insisting on it. For example, for a very long-time boilerplate language in book publishing contracts failed to account for the rise of digital e-book version licensing. By not quickly adapting to the new media availability that were not covered in the tried and tested language, it cost publishers millions while savvy novelists figured out they had retained those rights before the boilerplates were changed at the major publishers.
There are many types of clauses that, once set down and tested, fall into boilerplate treatment. The complicated force majeure clause is a common one.
Force majeure clauses in contracts
The term force majeure comes from the French for “superior force” meant to refer to an unanticipated powerful event outside of the control of the parties to the contract.
force majeure defined: “An event, neither anticipated nor controlled by contractual parties, that may operate to excuse one or more parties from performance of a contract.”
Several key points of a force majeure event are that it is:
- Unanticipated by the terms of the contract or by either party
- Of such nature as to completely disrupt some or all of the obligations and/or performance required by the contract for a period of time
- From a source that is superior to and not under the control of either party
Such an event trigger is usually enforced, if at all, to toll expectation of performance for a period of time. If that period of time becomes untenable, then the parties can mutually agree to terminate the expectation of the specific performance affected or, if severe enough impact, all as yet unfulfilled aspects of the contract as well.
Although often thought of as the “act of god” clause, actual applicable forces can be either natural or man made as long as the key points listed above apply. Typical examples listed in many clauses are earthquakes and hurricanes (natural) or war and political upheaval (man made) but many other complicated disasters could be included.
But just because it is a massive event doesn’t necessarily let it fall into a force majeure trigger. If the producers are contemplating shooting a production in a war zone that is currently under a cease fire, if the cease fire is broken and war breaks out, the clause wouldn’t trigger because that outcome could have easily been anticipated by the parties.
The particular “force” must be specified enough
It may seem odd that the clause must state those types of calamities that it will cover while at the same time be only listing unanticipated events that couldn’t be planned for. It is a finely tuned balancing act. Most drafters try to be as generic as possible in the sample disasters that would apply (e.g. “acts of the state prohibiting production”) but the courts have been consistent in that the examples must be as specific as possible, interpreting variations very narrowly. You can see why, once a block of language is found to be acceptable by a judge attorneys would be very reticent to alter it.
How specific does it have to be? Does “war” cover all state actions of violence? What about police actions? And does the previously visited “cease fire” count as a continuation of war or a cessation where production can continue?
Add in the fact that all of the worst-case scenarios considered to be included in the force majeure verbiage are thankfully rare events, there isn’t much clear precedential direction in how to word things to make sure you are covered in every event. And not everything qualifies, even when it impacts production totally.
The pandemic dilemma and force majeure
The question of the day, though, is would something like the current pandemic be an “act of god” that would trigger a force majeure? The answer isn’t my usual, “It depends.” It actually is, “Not likely.”
The level of disaster that a global medical crisis causes isn’t one that is usually contemplated when listing out examples in the clause. And it doesn’t easily fit into the categories of the usual ones listed. It can be as devastating as an earthquake or hurricane, but, isn’t as isolated in location or term of effect before recovery. It may be as globally involving as a world war, but, isn’t being guided and potentially controlled by a powerful leader or group that could, potentially come to their senses and declare peace at any time. Global, uncontrolled and sustained, a pandemic lies in a devastating class by itself. But even if it was listed in a prescient contract’s potential cataclysms list, it isn’t the type of event that a force majeure clause is intended to nor can readily help to cure.
The scope is too large. It is global. The length of time of effect is longer than nearly all other “normal” disasters. The underlying usual assumption that’s the basis to enact a force majeure clause is that the parties to the contract would be placed at a disadvantage somewhat unique to this production in the marketplace. Someone else may be doing better or is unaffected and so these parties are at a disadvantage because of the event. In a pandemic, that isn’t the case. Everyone is equally harmed everywhere. No one is not affected. If everyone is in the same boat the force majeure clause isn’t the bucket to use to bail us out.
The “majeure” must be the main actor
Disasters are complicated. And if a force majeure clause is to be invoked, there must be clarity as to cause and effect. The disaster itself must be the direct cause linked to the external act covered. If the clause lists “flooding” as a contemplated event, the production must have been halted directly because of the flooding, say, the set was washed away. A flooding event that didn’t directly impact the production but did impact the delivery of necessary issues for that production (say, the airport to get crew and equipment to and from the set was closed by the flooding or closed to facilitate the disaster recovery efforts,) then “flooding” wouldn’t be an applicable force majeure.
It could be that the secondary effect was also contemplated as a force majeure event (e.g. “unexpected interruption of transportation services, for example pilot strike.”) But it would have to directly apply and the relied on example would have to closely match the situation. The natural disaster of water washing away a runway is different than the man made disaster of pilots choosing to interrupt the normal operation of airline activity. If the example and the actual are too far apart, it is unlikely that the courts will uphold.
Complications of realizing a force majeure
Even when all the elements align, the right disaster, the right language used, there are still formalities necessary to be followed. The clause is rarely automatically triggered by its terms. Usually there’s a specific formal notice necessary to invoke. The notice procedure must be followed properly, which can be made more difficult if the disaster also affects the specified delivery process (e.g. must be by registered mail and the post offices are closed because of an anthrax mail scare).
What must be remembered is that a force majeure clause is not a “get out of jail free card.” It is not intended as a way for any of the parties to the contract to get out of their responsibilities. Think of it as an “everybody loses” clause. If you think you’re able to walk away and let the other side suffer the consequences, you’re probably wrong in your interpretation.
A force majeure clause is a way to allow a strategic withdrawal from suddenly oppressive or undeliverable obligations in a civilized manner. It is a way of allowing a pause or complete stop due to unforeseen events, to avoid an un-negotiated power play advantage between the parties. The correct view of a force majeure event is to see that a civilized resolution of these bad events can be had where neither party takes all the negative impact but parties can survive to contemplate future business in a more uneventful, future business environment.
Hopefully, we’ll get to see some of those again soon. It depends.