Category Archives: force majeure

Things that shouldn’t count as force majeure

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Define the term “force majeure” for me.  Looking online, there are several:

  • it’s French for “superior force”
  • act of God: a natural and unavoidable catastrophe that interrupts the expected course of events  (WordNet)
  • a common clause in contract which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties (Wikipedia)
  • an unavoidable catastrophe (Wiktionary)

So what’s the common theme?  It’s the ability to AVOID a particular set of actions.  In other words, force majeure events are those which are unavoidable or unforeseeable.  If you only click one link above, do the one for Wikipedia and learn about the three-part test in French and international law for what constitutes a force majure event.  UCC Section 2-615, “Excuse by Failure of Presupposed Conditions” and the Restatement of Contracts 2d, Section 261 “Excused Nonperformance” also include multi-part tests.

But we’ve gotten lax in contract drafting in the US and folks have assumed that force majeure clauses (those that allow a party to not perform as a result of one of these types of events) were continually written with actual unavoidable events listed.  In fact, almost every force majeure clause I now see contains at least one, if not more, of the following things as force majeure events:

  • strikes/labor disputes
  • telecommunication difficulties
  • supply chain problems
  • terrorism and war (sometimes even phrased as “acts of the public enemy”)
  • riots
  • government regulation

Unfortunately, these are not force majeure events.  Why?  Because most of them can be planned for… and even something like terrorism and war (especially when they’re happening right now), should be planned for.  If you can plan for them, they’re foreseeable.  And if they’re foreseeable, they’re not unforeseeable.  See where I’m going with this?  🙂

So when you strike these items out of the force majure event clause, you’re going to get push back because people don’t want to be responsible for planning in all eventualities.  You’re not asking them to do it.  Rather, you’re asking that contract performance not be hindered or halted as a result of things that are capable of having a backup plan.  Which means that you could, if you were so inclined, draft language which allows for these items to be force majeure only if they were part of a backup plan that still was impeded.  In other words, you’ll give these items force majure weight if the party claiming force majeure can show that they had planned for them properly, but still ran into trouble.

Oh, and by the way, force majeure also isn’t one-size-fits-all.  Would you EVER list telecommunication difficulties in a contract with your telephone service provider?  Additionally, force majeure protections should benefit BOTH parties, even if one party’s sole obligation is to cut a check.  Payment can be made quite difficult by floods and hurricanes, just ask the good people in Louisiana, Alabama and Mississippi about business deals during Katrina.

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Updating Contract Language for the 21st Century

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Holly Towle wrote an excellent article on the boilerplate contract language issues that might now exist in your contract language.  Read the article… consider the issues… review your templates.  Make some changes.  Of course, you can always just call me and I’d be happy to review your contracts for you.  😉

This Week on The Web 2009-09-13 (my birthday edition)

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It happens to be my birthday weekend and between eating some great food, playing Guitar Hero with my wife and hanging with the family, these are the things that happened around the web this week – maybe you already read about them, maybe you need to again – there were some REALLY great discussions going on.  Come join the party on twitter (follow me here and you’ll join the conversation live.)

I also realized that many of you might have no idea what you’re seeing below.  Sorry.  These are “tweets”, 140 maximum character messages sent via Twitter.  Within the Twitterverse individual users follow others and have followers (think of it like overlapping Venn diagram circles).  To read a tweet, you have to wade through a bit of jargon used to make the most of the 140 character limitation.  “RT” for example, is shorthand for “Re-tweet” and the @____ is the username of some other individual on Twitter.  Combined together, then, “RT @_____” means that someone else wrote a tweet that I found important and I now want to forward along to my followers.  The URL’s are then also shortened by shortening services like bit.ly to make the most of the character limitation, too.  Lastly, you might see “hash” identifiers “#______” which are ways to tag tweets of a particular flavor for easy searching later and “<” which means that I am commenting on what came before it.

Recovering from a Disaster

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I love to play a simple, yet addictive game called Bejeweled on my Palm Treo.  Recently, Pop Cap Games – maker of Bejeweled – released it on Facebook, too.  It’s free to play and hey, they even award prizes based on collective team scores earned every week.  So not only would I normally play because I love the game, I play to perhaps win a prize, too.  What’s important to note, though, is that I don’t pay anything to play.  I don’t pay to access Facebook (at least not yet) and I don’t pay to play Bejeweled.

Yesterday, there was a fire at the Seattle-based hosting facility which Pop Cap uses to host their games.  It apparently brought several organizations to their collective knees – hopefully no one was hurt in the blaze.  Bejeweled, though, was down.  Pop Cap owed no explanation to anyone – there were no paid users, no SLAs, no force majeure.  But their response to the user community was exactly what I would expect from large corporate vendors, yet never receive.

First, Pop Cap posted a notice on the Bejeweled page stating: 1) an apology for the outage! (remember, they didn’t cause it); 2) what happened to cause the outage; 3) reassurance that each users’ data was safely backed up and would be restored when the servers were back online; and 4) an estimated time when the game would be available again.  Second, today the game is back online.  You still see a notice about what happened and why things will look a little funny with your friends’ scores for a little while.  And they apologized again.

Generally speaking, discussion of force majeure in the commercial contracting world (the suspension of contractual obligations as a result of an unforeseeable event) is usually fairly quick and pretty painless once you know the basics.  Both sides usually only spend a maximum of 30 seconds discussing this section of the contract and thus if anything actually does happen that would require invocation of the provision, many are flummoxed about how to handle it.  In fact, some even forget to invoke – they simply look to Service Level Agreements to see if there’s anything that can be done to recover from the other side.

Part of this could be easily solved if enterprise software vendors would follow Pop Cap’s lead in terms of how they handled downtime.  But again, generally speaking, they don’t.  They want the customer to have to report a problem; the customer to have to call in for status updates on fixes; and almost never explain why there was a problem in the first place.  Oh, and I’ve never heard a vendor apologize, either – which, as any psychologist will tell you, is really easy and goes a long way to assuaging feelings.

So, take it from Pop Cap – who with millions of probable users (I don’t have an exact count, of course) and none of them paying a cent, managed to just make me want to go buy something from them simply because of how they handled a problem with a free game and without having any contract tell them how to behave, either.

Economic Renegotiations

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In an interview with Inc magazine the other day, I was discussing the effects of the current economic situation on contract negotiation potential.  More specifically, everyone seems to believe that the current downswing is cause for not only some great deals, but also for the potential to create some re-negotiation possibilities.  In other words, the various authors of these pieces are looking for confirmation that now is a great time to buy.  Well, my advice on that issue is pretty simple and I’ll point you all towards the article when it comes out.  😉

I’m more concerned at the moment with the opportunity for re-negotiation because this opportunity does actually exist.  But it’s an opportunity that ALWAYS exists.  The current economic situation is merely bubbling the issue to the surface.

Now, I’ve literally just spent the last half-hour writing and re-writing an attempt to eloqently and gently explain how negotiations are supposed to work and how they’ve not really worked over the last few years due to bullies (both on the vendor and customer sides of the transactions).  The truth, however, is that there isn’t a nice way to explain it.  The negotiation situation has been bad and it continues to be bad – even after the current downturn has made everyone more acutely aware that bad deals are worse when the economy turns sour.  So I’m just going to be really blunt.

Folks: do good deals.  Work well with each other to make sure that each party’s true needs (and a few of each party’s wants) are met during the deal.  Look deeply into the financials of the deal, as well as how they’re calculated.  Don’t guess, don’t assume, don’t overestimate.  Use real numbers, actual counts and a solid basis for each transaction.  Get rid of puffery, boasting, bloating and non-essentials.  If you only THINK or BELIEVE something is going to come to pass, don’t base the deal on it.  Rather, find a way to add it in as a POTENTIAL opportunity – a possible future transaction.  But don’t commit to an uncertain future.

In more Plain English™, buy what you need, sell what you have.  If you don’t need it or don’t have it, don’t do the deal.  Don’t use pretend numbers to support the transaction or the promise of potential to entice you into something that won’t work for you in the current state.  And don’t expect either party to return to the table when the economy goes bad or things don’t work out as planned for you.  Your problem isn’t THEIR problem.  (Perhaps you’ve heard this as “Poor planning on your part doesn’t constitute an emergency on my part.”)  And, for the people who are thinking it, this is not a situation for force majeure.  Economic fluctuations are understood and always possible.

Again, do good deals.  Apply the Five Fundamental Skills for Effective Negotiation.  If you need/want help, get it.  Oh, and contrary to what is happening with certain large industry players at the moment, don’t expect someone else to bail you out because you didn’t plan.  If you haven’t learned the lesson so far, let’s put it in Plain English™, too:  The economy swings both ways.  Unexpectedly.  More often than we’d like.  Regardless of your political leanings, fiscal and risk conservativism is always appropriate.

Force Majeure for the 21st Century

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Chadwick Busk over on his blog “The Fine Print:  Musings of a Corporate Contracts Lawyer”, has a great post on the changes needed in your standard force majeure clause to deal with issues from the new millennium.

“Either party’s non-performance of this Agreement shall be excused to the extent that it is caused by any of the following events:

…

(iv) Destructive power unleashed by any of the following: the finding of the remaining crystal skulls, the reverse engineering of alien technology, or the discovery of the Ark of the Covenant.”

Go read the full post here.