How Does a Force Majeure Clause Protect You?

Many may have heard the term, but force majeure sounds foreign and technical, so let’s break it down. The phrase is French for "superior force," referring to events or circumstances beyond any party's control, which make it difficult or impossible for one or both parties to meet obligations in a contract. Such events include natural disasters, wars, pandemics, labor strikes, and more.

In essence, a force majeure clause is designed to protect parties in a contract from liability if they cannot perform due to events beyond their control.

‍Why Force Majeure Matters in Real Estate

‍Real estate contracts frequently include force majeure clauses to protect buyers and sellers from unpredictable events like hurricanes, which are common in states like Florida. For example, when Hurricane Milton hit Florida last week, many closings scheduled for that day faced delays. With a force majeure clause in place, affected parties have protections, including flexibility to extend the closing date.

In Florida, force majeure clauses tend to be broad, allowing flexibility around the type of events covered. In contrast, states like New York require a more detailed approach to specifying the kinds of events that would trigger force majeure.

‍Key Elements of a Force Majeure Clause

‍When drafting or reviewing a force majeure clause, it's crucial to consider these components:

Defining the Event: Identify what types of events qualify as force majeure.
Defining the Obligations: Specify the obligations or breaches the party is excused from.
Establishing Cause and Effect: Outline the direct connection between the force majeure event and the inability to perform under the contract.
Outlining Outcomes: Detail what happens if the event continues, including extensions or possible termination of the contract.

The FARBAR contract (used in Florida real estate) is a great example, as it includes a standard force majeure clause covering natural disasters, acts of terrorism, civil unrest, and more.

‍Real Estate Scenario: When Force Majeure is Triggered

‍Let’s use a real-life example: Suppose you had a closing scheduled for last Thursday, but Hurricane Milton struck, impacting much of Florida. The force majeure clause in your real estate contract would likely allow a reasonable extension—up to seven days after conditions have stabilized.

If neither party could comply by that extended date due to lingering issues from the hurricane, the contract allows up to 30 days for resolution. Beyond 30 days, either party could opt to terminate the contract and refund the buyer’s deposit.

‍Final Thoughts

‍Force majeure clauses are essential in contracts, especially in real estate, where external factors like weather can significantly impact deadlines. Always ensure any force majeure clause in a contract is specific, covering likely events and setting clear expectations for both parties.

If you have any questions about force majeure clauses or real estate contracts in general, don’t hesitate to reach out to our team!