Force Majeure - What It Is and Why You Need To Care
Since the COVID-19 pandemic began “Force Majeure” is a term that’s been thrown around like the classic kids game “hot potato.” Nobody wants to be stuck with this hot topic when the music stops. Unfortunately, for now, we don’t know when the music will end. However, we do need to understand what this vague legal term means.
So, What is Force Majeure?
Force Majeure is a term that dates back to Roman times and comes from the French meaning “superior force.” The term “Act of God” is also used simultaneously at times but it should be noted that this term usually only applies to natural occurrences outside of human control.
Force majeure is much more comprehensive. It’s a common clause in legal contracts that ultimately releases both parties from liability or obligation when there is an extreme, unforeseeable, or unavoidable circumstance that nobody sees coming.
Did we expect to see this global pandemic? (You will get a very different response depending on who you ask - e.g. Donald Trump or Bill Gates.) Does COVID-19 invoke force majeure? That’s where the debate gets messy.
Some force majeure clauses are generic and just state “Acts of God” or “unpredictable events”, while others are more specific and include certain circumstances including, but not limited to:
-Natural Disasters (think hurricanes, floods, fires, earthquakes, and weather disturbances - a.k.a “Acts of God”)
-Acts of Terrorism (It should be noted that this was not a common term to list in force majeure clauses until after 9/11).
Overall, it’s hard to invoke force majeure. The courts tend to interpret force majeure clauses narrowly, meaning, usually the events specifically listed in the contract will be covered. An example is that a “threat of terrorism” might not be covered even if an “act of terrorism” is listed. Of course, this will depend on what country you are working in and their laws.
Unfortunately, for most of us in the professional events industry (and in all other industries for that matter) pandemics or epidemics were not included in contracts’ force majeure clauses before COVID-19 swept the world. So, we are in uncharted territory. Even those who did include it in their contracts, like the NBA, are still having ongoing discussions to determine liability. This is no easy legal term.
For the record, I AM NOT A LAWYER (in case it wasn’t obvious enough) and I am not offering any legal advice in this article. My purpose is to give a general overview of what force majeure is for those of us who aren’t lawyers. If you have any questions, doubts, or need help with specific situations regarding force majeure, I highly recommend you contact a lawyer.
As a side bar, I understand why lawyers spend years studying this law stuff and get paid the big bucks to read loads of boring text with legal jargon that can easily put me to sleep.
How Does Force Majeure Affect My Event?
Many meetings, events, and conferences have been and will be affected by COVID-19. In terms of the contract, the parties should go back to the state they were in before the contract existed, but the reality is that you shouldn’t expect refunds.
Many companies would not be able to survive if they were forced to honour the force majeure clauses for every single contract. This has led to the rescheduling of events, vouchers, credits, and the pivot to online events. And in the worst-case scenario the loss of funds; in the best-case scenario, a full refund.
It’s important to understand all your options and how they will affect you and your clients in order to get the best outcome. Unfortunately, this is not a positive situation for anyone and each case is unique. Unless companies can come to an amicable commercial agreement, we will leave it to the lawyers and courts to decide the specifics in the coming years.
Force Majeure and the Events Industry - Commercial Agreements and Cooperation
Our industry relies on relationships and cooperation to foster the best experiences for our clients. (Who else is longing for in-person interactions right about now - with social distancing of course? Humans look so much better in person!)
Even if we are in direct competition with each other, we all have the same goal, which is to bring people together and create lasting memories that have an impact on people's lives. We need to remember this before seeking out lawyers to go to battle for force majeure.
Think long term before acting. You are putting your business at risk if you go to court as:
- You might not win - don’t expect leniency at all
- Your clients and partners might lose confidence in you and your business
- It could take years to resolve in court
You want your company, brand, and image to remain positive to make sure your clients keep coming back. Don’t put your reputation in jeopardy if it’s not necessary, so do your best to move forward with the contract as planned and avoid legal disputes. There is no precedent for this, which many courts tend to use for deciding the outcome of a case.
Consider a commercial agreement (a legally binding contract) that both parties may not be happy with, but at least satisfied with, under the circumstances. We are living during a difficult time and nobody wins when events are cancelled. If we work together in solidarity we can help keep jobs, avoid business closures and support each other until we can get back to live events.
Future of Force Majeure
From now on, force majeure clauses will certainly address pandemics and epidemics in order to reduce the risk of liability associated with cancelling or postponing events. Your contracts should too.
As we are forced to change and adapt to a post-COVID world, so will laws. With a better understanding of force majeure, you can put yourself and your company in a better position in the future when signing contracts and agreements.
In the meantime, let’s do our best to be patient, to work together to create solutions, and remember we are all in this together - literally - everyone in the world.