Hurricanes: What Does Force Majeure Mean to My Business?
By now, the names Harvey and Irma have become synonymous with havoc and destruction. Aside from the devastating effects of these storms on personal property, they also caused businesses to grind to a halt. Flooding, loss of business inventory, irreparable structural damage, loss of power and other essential services, and forced closure of retail stores, hotels, and restaurants are but a few of the multitude of categories of damages that inevitably must be considered after a major weather disaster.
The Retail, Restaurant, and Hospitality ("RRH") industry were especially affected by the hurricanes in ways that may not have been contemplated or was simply underestimated. While the destruction of property is obvious, some of the damage is not as readily quantifiable. For example, what does a business owner do if it receives a notice or has to assert "force majeure?" A force majeure clause, which basically means an "Act of God," is generally included in most commercial contracts. The effect of the clause is to temporarily excuse a party's duty to perform certain obligations under the contract due to circumstances beyond the party's control. A force majeure clause works both ways – (1) it can specifically state the kinds of events or circumstances that trigger rightful non-performance, and (2) trigger obligations that must still be performed under the contract despite the occurrence of the event falling within its definition.
The force majeure clause may require that certain notice requirements be met in order to invoke it as a means to suspend performance under the contract. Failure to follow the specific notice requirements of the clause may result in an ineffectual assertion or waiver of the force majeure's protection. In addition to notice, some clauses have time limitations on how long performance is suspended or excused. Courts have often interpreted force majeure clauses narrowly; meaning that if the clause does not expressly state the precise event that caused damage, the party seeking to invoke its protection must continue to fulfill its obligations under the contract.
As the businesses affected by the hurricanes begin the long process of returning to full operations, we recommend that RRH property owners, lessors, lessees, employers, etc., have counsel review their existing contracts, in particular the force majeure clause to determine whether your business is protected. Counsel can assist you with seeking protection under a force majeure clause. Counsel can also provide assistance with responding to other business with which you do business, like those who provide necessary products and services needed to continue your business that may or have already asserted force majeure. Counsel can also analyze whether an assertion of force majeure is proper. Lastly, given the recent events, RRH businesses should consider whether their force majeure provision needs to be revised or drafted, if it is not already included in their contracts.
Kane Russell Coleman Logan PC is a full-service law firm with offices in Dallas and Houston. The firm's Retail, Restaurant, & Hospitality Practice Group have many years of experience representing nationwide RRH companies. If you would like more information about force majeure clauses or need assistance with current or future contracts, please contact the Kane Russell Coleman Logan attorney with whom you regularly work or the authors of this blog.