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Thu, Apr 2, 2020| | Articles

Force Majeure In Residential Contracts & COVID-19

Force Majeure In Residential Contracts & COVID-19

By now you have probably had a client wanting to invoke the force majeure clause of their contract. The purpose of this clause is to allow for parties to delay performance or actually be excused from performance in the event of unforeseen or uncontrollable events.
 
Like many contracts, standard in the FAR/BAR contract is a “Force Majeure” clause. The clause provides that neither party shall be required to perform any obligation under the Contract or be liable for damages if performance or non-performance is disrupted, delayed, caused or prevented by Force Majeure. The contract defines “Force Majeure” to mean “hurricanes, floods, extreme weather, earthquakes, fire, or other acts of God, unusual transportation delays, or wars, insurrections, or acts of terrorism, which, by exercise of reasonable diligent effort, the nonperforming party is unable in whole or in part to prevent or overcome.” 
 
Despite all the hurricanes Florida has been through, there is not much legal precedent regarding force majeure clauses. These clauses are generally narrowly construed, meaning that a court would limit these clauses’ application so that they will excuse a party’s performance only for events specifically identified in the provision.  Note what is not included in the FAR/BAR definition: “epidemic” or “pandemic.”  To our knowledge, there are no Florida cases addressing the issue in this context, though that will surely change because of COVID-19.  
 
So, what should you do now?  Tell your clients to discuss their specific situation with their attorney and apply good business judgment. Any new contracts should add language clarifying that a delay due to COVID-19 is an excuse for delay in performance. There are many considerations that go into drafting language that will work in our current situation. To avoid any potential exposure for inadvertently giving legal advice, brokers and agents should seek legal guidance in drafting and interpreting contractual clauses.