An Orchestra, the DC Beltway, and Acts of God: Why Your Contracts Need a Force Majeure Clause
Eagerly, I purchased tickets for a Baltimore Symphony Orchestra (BSO) concert several months in advance, carefully selecting seats to provide an optimal view of the violinist on stage. Israeli violinist Pinchas Zuckerman[1] was to perform the J.S. Bach a minor violin concerto and to conduct the BSO in a program of Schoenberg[2] and Beethoven. I arrived early, took my seat, and (since I was gearing up for a real estate closing) checked my business e-mail on my phone while waiting for the 8PM concert to begin.
The first piece was the Bach, which required only a small orchestra, but yet as of 7:58PM, only a handful of the necessary musicians had made their way to the stage. Nevertheless, at 8PM, there was an announcement. I had expected the usual “please turn off your cell phones and do not take pictures or make recordings.” Instead, we were given an explanation for the unpopulated stage -- half of the orchestra had not yet arrived at the concert hall because they were in a bus stuck on the DC Beltway.[3] Due to these circumstances outside of the control of anyone involved (and perhaps even beyond all human control), the concert would be delayed.
Force Majeure – Hurricanes, Earthquakes, Riots and More
In the law, we call extraordinary events which interfere with a legal obligation as “force majeure.” Typically, in law, we think of force majeure as being weather conditions such as hurricanes, floods, tornadoes, volcanic eruption, blizzards, and the like[4] or extraordinary events outside of the control of those involved, such as war, terrorism, riot, or strikes. Although I have never seen being stuck in traffic on the DC Beltway listed as force majeure in a contract, based upon my experience with that particular highway, I believe it qualifies as such.
Parties to a contract generally agree that it isn’t fair to require performance of a contract in accordance with its terms if certain uncontrollable or extraordinary situations arise. Therefore, many contracts include in them what are known as “force majeure clauses,” which relieve all parties to a contract from performing under certain extraordinary circumstances.
There is no single definition of what circumstances are force majeure. Therefore, in addition to including in the contract a force majeure clause, the parties must agree upon what will be considered force majeure for purposes of that contract. In order to do this, the parties should work with their attorneys to determine what types of circumstances should be listed given the nature of the specific contract.
Examples of circumstances which might be included in a definition of force majeure include:
• Extreme weather conditions, such as hurricanes, floods, blizzards, and tornadoes.
• Natural phenomena, such as volcanic eruptions, earthquakes, wildfires, and mudslides.
• War, terrorism, riots, and other forms of civil disorder.
• Limitation or elimination of transportation options, such as grounding of aircraft, train derailment, or major changes in transportation availability.
• Labor strikes, unionization, and other major employee actions.
• Epidemics, pandemics, and other significant medical or disease situations.
• Suspending of trading in the stock markets or other major economic circumstances.
• Changes in legal requirements making performance of contract requirements challenging or impossible.
• Changes in availability of raw materials.
Customizing What is Force Majeure
Which of these possible force majeure circumstances included as such in a particular contract is a matter of negotiation and will vary depending upon the type of contract, industry involved, and needs of the particular parties. Each party needs to work with an experienced attorney who understands not only what can be included in force majeure but who also can assist the client in evaluating the risks posed to a particular contract by particular circumstances.
Although things like extreme weather, natural phenomenon, terrorism, war, and the like might be applicable to most contracts, other of the circumstances listed above may not always apply to a particular situation. For instance, with a construction contract which is highly dependent upon availability and price of labor, strikes, unionization, and labor disturbances could be critical to include among the circumstances considered force majeure. However, availability of labor might be less important to a contract for the purchase of an office building.
Likewise, while air and rail transportation suspension might be completely irrelevant to a contract for the purchase of an apartment complex, air and rail transportation might be of critical importance in a contract for a national convention expected to draw individuals from around the country. That same national convention contract may have no concern about availability of raw materials, but a contract for construction of custom machinery might well include availability of materials in force majeure.
Quantifying Force Majeure
Parties also may attempt to quantify circumstances constituting force majeure based upon their impact on the contract. For certain types of force majeure items, the parties may want to attempt to quantify thresholds which must be met before a particular item is considered force majeure. For example, grounding of ten percent of the aircraft of a particular airline due to an isolated weather event might not be force majeure, but grounding of all aircraft due to an extraordinary situation like 9/11 could be.
Parties also may include more general terms quantifying the impact of the force majeure. It is inadvisable to use extreme language, for instance, requiring that performance be “impossible” before circumstances are considered to be force majeure. However, it does make sense to limit applicability of force majeure clauses to circumstances which have a significant impact on the contract or the parties. For instance, a tornado which downs a couple of trees and limits parking lot use for a few days without building damage might not excuse payment of rent under an office lease, but if the same tornado were to blow out windows in the building, it likely would excuse rent payments.
Considering the Impact of Force Majeure
Parties also need to work with their attorneys to negotiate and include in their contracts what level of impact on the performance is required before the force majeure clause is triggered. Most contracts will excuse complete inability to perform a contract due to a force majeure situation. However, in the case of adverse weather and a construction contract, the force majeure may just delay performance. Or, in the case of a contract for a national convention or even a wedding, a transportation disruption or pandemic might reduce the number of hotel rooms booked by attendees, even though it does not result in cancellation of the entire event.
As another example, changes in legal requirements which increase the cost of performance of the contract by only one percent might not constitute force majeure, but those which increase the cost for one party by 25% might well be force majeure.
What Happens if You Don’t have a Force Majeure Clause?
It makes a lot of sense for parties not to have to perform under a contract if there is an Act of God or other event out of their control, but the law does not automatically do so. If the parties for some reason do not work with their attorneys to negotiate and include in their contract force majeure clauses all is not hopeless, but the remedies may be less than adequate.
Generally, in an extreme situation that goes to the root of the purpose of the contract, the parties may be able to claim a “frustration of purpose.” However, to do that, the circumstances need to interfere with the underlying purpose of the contract. For example, if a tornado were to destroy an office building that was the subject of a real estate purchase agreement, that might be “frustration of purpose.” However, if the office building were left standing but the remainder of the area was demolished, leaving the office building less valuable because it is in the middle of a wasteland, that likely would not be frustration of purpose.
Likewise, if it is completely impossible for a party to perform under a contract, then, the party might be excused. For instance, if a farmer agreed to sell all of the eggs produced by its hens to a grocery store, only to have the henhouse destroyed by fire and all of the hens killed, then the party might be excused under the concept of impossibility. However, if the contract instead required the farmer to sell a set number of eggs to the grocery store, destruction of the hen house would not render performance impossible. Even if the farmer intended to satisfy the contract obligation from his/her own hens’ production, it would be possible (albeit possibly much more expensive) for the farmer to obtain the eggs elsewhere and still perform under the contract with the grocery store.
How would the BSO Concert Delay be Viewed Under the Law?
Going back to the BSO concert delay due to the musicians being stuck in a bus on the DC Beltway, whether it would be force majeure would depend upon whether a force majeure clause had been negotiated. Absent that, given the vagaries of the DC Beltway, it is possible that absence of musicians necessary for the performance might well be considered frustration of purpose. Yet, since some of the musicians were on the stage (apparently not having been on the bus in question), it is possible that the performance could have gone on, albeit with significantly reduced instrumentation without those on the bus.
The challenge in answering this question with respect to the BSO concert situation illustrates the importance of a force majeure clause tailored to the specific parties. Since demonstrating frustration of purpose or impossibility can be challenging, it is best for the parties to a contract to work with their attorneys to customize a force majeure clause to their specific situation, industry, and needs.
© 2018 by Elizabeth A. Whitman
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[1] Pinchas Zuckerman is among the greatest living violinists and musicians. He was born in Israel in 1948, the year it became a nation and came to the United States at the age of 18 to study at The Julliard School with famed violin pedagogue, Ivan Galamian (with whom one of my major violin teachers also studied). Zuckerman is a highly versatile musician, having performed on both violin and viola and as a conductor.
[2] Arnold Schoenberg was a 20th century American composer most famous for atonal music, specifically, for creating what is known as twelve-tone music, which is based upon a series using all twelve pitches in the chromatic scale in a particular order.
[3] Music critic Mike Bevel describes this unusual development in his November 16, 2017 Review: Pinchas Zukerman Performs Bach and the Baltimore Symphony Orchestra.
[4] Weather conditions and other natural phenomena commonly are referred to as “Acts of God,” which might be considered to be a subset of conditions constituting force majeure.