Force Majeure Clauses in New Jersey Contracts
Let’s examine force majeure clauses in New Jersey contracts. Force majeure is a common contractual provision in agreements that may excuse and relieve a party or both parties from performance of contractual obligations due to circumstances outside of the parties’ control. As the coronavirus disease continues to disrupt our personal lives and business as usual, many individuals and companies in New Jersey have experienced business interruptions, cancelled contracts, and are left evaluating future contractual obligations.
From cancelled wedding events, real estate contracts, lease agreements, employment contracts, to government mandated closures of business operations, Covid-19 has affected life and business throughout the state. Many clients have contacted our office for legal advice regarding their performance obligations under existing contractual agreements. There are various principles of law that may apply, including force majeure, impossibility, impracticability, and frustration of purpose, that may apply to Covid-19 related issues concerning contractual obligations on a wide variety of issues. For the sake of this article, we will explore the trending legal topic of “Force Majeure” clauses.
Force majeure clauses are a common contractual provision in agreements that may excuse and relieve a party or both parties from performance of contractual obligations due to circumstances outside of the parties’ control. On its own, the term force majeure is French for “superior force.” When a superior force, i.e., natural disasters, Acts of God, government actions, to name a few, prevents one or both parties from fulfilling their obligations, force majeure clause may excuse (or suspend for a certain duration) the parties obligations under the contract.
Determining whether a force majeure clause (or other principle of law) is applicable to excuse performance is a fact specific inquiry. Accordingly, the contractual rights and remedies must be viewed on a case-by-case scenario.
On any given case, the first step is to review the contract to determine if the contract contains a force majeure clause. Generally, force majeure provisions are not implied and must be expressly provided for in an agreement. If the contract does not contain a force majeure clause, the parties to a contract are left with a few common law doctrines to excuse performance or obligations, such as the doctrines of impossibility, impracticability, and frustration of purpose.
If your contract contains a force majeure clause, the evaluation begins with the words and definitions contained in the contract. Depending on the contract, the force majeure clause may excuse varying degrees of performance, with possible full excuse of performance, and the contract may include agreed upon remedies when unforeseen events arise, such as Covid-19 related issues. Again, whether performance of a party or parties’ contractual obligations may be excused is fact sensitive and must be construed on a case-by-case basis.
While New Jersey’s case law concerning force majeure clauses is sparse, the impact from Covid-19 is historically unique and it is expected to generate new case law given the extent of its impact on personal and business contracts.
In the wake of Covid-19, you should consult with an attorney if you have any questions concerning your obligations or inability to perform under the contractual obligations. This not only includes existing contracts, but also contracts that are in the process of being negotiated.
If you have any questions concerning force majeure clauses, please contact the attorneys at the law firm of Puff & Cockerill.