Force majeure and fortuitous event in contracts
Unforeseen events can impact the performance of contracts. Understanding force majeure and fortuitous event helps define responsibilities when something is beyond the parties' control.
What are force majeure and fortuitous event
In general, both concepts refer to events beyond the parties' control, unforeseeable or unavoidable, that prevent the performance of an obligation. Legal scholarship usually distinguishes the terms, but, in contractual practice, both are usually treated similarly, with the aim of setting aside liability for non-performance caused by facts beyond the parties' will.
Effects on obligations
When recognized, these events may, depending on the case, suspend obligations, extend deadlines or even justify the termination of the contract. Recognition, however, is not automatic. In general, it is necessary to demonstrate the connection between the event and the impossibility of performing, as well as that there was no way to avoid or overcome the situation with reasonable effort.
What is usually assessed
To verify whether an event falls within these situations, some aspects are usually considered:
- Unforeseeability or unavoidability of the event
- Absence of fault of the party invoking the event
- Direct relationship between the event and the impossibility of performing
- Whether or not there are reasonable alternatives to perform the obligation
The importance of the contractual clause
Many contracts expressly govern the matter, defining what the parties understand as force majeure, the notice procedures and the effects on deadlines and obligations. Well-drafted clauses tend to reduce uncertainty in times of crisis. Even so, the interpretation depends on the specific case and the applicable legislation, which is why clarity in drafting is usually valuable.
Frequently asked questions
Does any unforeseen event release a party from performing the contract?
No. Not every unforeseen event constitutes force majeure or a fortuitous event. In general, the event is required to be beyond the party's will, unforeseeable or unavoidable, and to effectively prevent performance. Common business difficulties, in themselves, are usually not sufficient. The assessment depends on the facts and on what the contract provides.
Do I need to notify the other party when such an event occurs?
It is usually advisable, especially when the contract provides for notice as a condition. Promptly reporting the event and its effects tends to preserve rights and reduce future disputes over good faith and diligence. Even where there is no specific clause, clear and timely communication is usually a good practice.
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