All California businesses rely on contracts, some of course to a greater extent than others, and these documents set forth the rights and responsibilities of the signatories. There are times when one or both parties can’t fulfill the terms of a contract, and that is especially true when issues arise that are beyond the control of either party.
That’s where having a force majeure clause (often referred to as an “Act of God” clause) becomes beneficial. Such a provision deals with the effect of an unforeseen event that makes it impossible for a party to perform its contractual duties, either timely or at all.
Specific reasons spelled out
An unforeseen event can occur at any time. When these events happen, they can affect the fulfillment of a contract. Two examples of unforeseen events are weather issues and civil unrest.
This how a force majeure clause can have an impact on business litigation. A force majeure clause spells out the types of events covered, and this can avoid penalties that would otherwise result.
Material impact on contract
Natural and manmade disasters can have a direct impact on a contract. Many jurisdictions apply a test when deciding if a force majeure clause applies. That includes determining whether the event prevents a party from fulfilling the contract.
Reasonable attempts made
An unforeseen event may affect the fulfillment of some portions of the contract. When that happens, the force majeure clause helps to ensure that future attempts get made. If an unforeseen event delays shipments, for example, the clause can allow those deliveries to get rescheduled without penalty.