• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

KPPB LAW

Corporate Law Firm

  • About Us
  • Attorneys
  • Practices
    • Asset Based Lending
    • Bankruptcy Law
      • Chapter 7
      • Chapter 11
      • Purchasing Assets
      • Creditor Committee Representation
    • Business Debt Collection
    • Commercial Loan Workouts
    • Commercial Real Estate Finance
    • Commercial Real Estate Transactions
    • Construction Law
      • Construction Project Planning
      • Construction Claims and Disputes
      • Construction Contracts
    • Contract Law
    • Corporate Governance
      • Formation of Entities
    • Cross — Border Transactions
    • Hotel Law
    • Immigration Law
    • Intellectual Property
    • Labor & Employment Law
      • Employment Litigation
    • Landlord/Tenant Law
    • Litigation & Dispute Resolution
    • Mergers & Acquisitions
    • Securities
    • Tax Law
    • Technology Law
    • Trusts & Estates
  • Firm News
  • Legal Blog
  • 1-678-443-2244
  • Contact Us

Contract Disputes · January 18, 2021 · by Roy Banerjee

What Is an Act of God Clause?

› Contract Disputes › What Is an Act of God Clause?

Temporary store closure sign board. Amid the COVID-19 chaos, businesses are relying on the Act of God clausesMany contracts include provisions that excuse one or both of the contracting parties from performing their contractual obligations due to the occurrence of an event that is beyond the parties’ control and makes performance impossible or nearly impossible. These provisions are “force majeure” (French for “superior force”) provisions, and they frequently enumerate an “Act of God” as one of the events that excuse contract performance. An “Act of God” for purposes of a business contract is usually an extreme weather event such as a hurricane, blizzard, flood, or similar natural event.

Amid the COVID-19 chaos, businesses are relying on the Act of God clauses in their contracts to avoid liability for completing their contract obligations. To what extent the Act of God clause will relieve them from their contractual obligations in part or in full is not clear. In every case, it depends on the wording of the contract itself.

What “Act of God” Clauses Provide

As indicated above, the Act of God clauses excuse one or both contracting parties from performing their obligations when circumstances arise or events occur beyond their control. These circumstances render contract performance so burdensome that its performance is impractical or impossible.

Depending on the contract’s wording, an Act of God clause can relieve one or both parties from their contractual obligations either temporarily or permanently.

Examples Of Acts Of God That Often Excuse Contractual Performance

Many Acts of God clauses list specific events that constitute an Act of God for purposes of the contract. They commonly include extreme weather events but, human-caused events can also excuse performance under the broader force majeure provisions. Those events commonly include:

  • Explosions
  • War and acts of terrorism
  • Epidemics
  • Governmental action such as expropriation, condemnation, and changes in laws and regulations
  • Strikes and labor disputes
  • Certain types of accidents
  • Any other cause beyond the control of either party (catch-all)

What Happens When The Contract Is Ambiguous As To Epidemics Like COVID-19?

A gavel on the foreground. An Act of God does not automatically excuse a party’s contract performance obligationsIf your contract specifically includes an epidemic or health emergency as an Act of God, the court is likely to include COVID-19 as such an event.

In most cases, the courts will construe vaguenesses in favor of preserving the contract. The court will likely find a way to require performance, even if delayed or modified from the original contract terms and provide other remedies as appropriate to the non-burdened party. Where the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond their control, courts should not be holding either party liable for breach of contract. However, the court is likely to order a return of funds paid for performance that was not completed.

The court’s inclination to narrowly construe Acts of God clauses means that the COVID-19 epidemic may not be an event that excuses a party from contract performance under this clause. But there may be other arguments in support of excusing performance. Performance could be excused under other force majeure provisions such as lockdowns or quarantines or, if applicable, the Uniform Commercial Code excuses parties from performing under a contract when it has been made impracticable or impossible.

In resolving a dispute, the courts will consider all the circumstances in light of the entire contract, including any liquidated damages provisions to resolve the party’s obligations.

Do “Acts of God” Automatically Excuse Performance Under A Contract?

An Act of God does not automatically excuse a party’s contract performance obligations. To invoke the Act of God provision or force majeure clause, a contracting party must be proactive and undertake the following steps:

Follow The Contract’s Terms For Asserting A Force Majeure Event

It is important to read the contract and follow any procedures and notices required by the terms of the contract itself. Failure to do so could impair or invalidate the party’s ability to rely on the Act of God clause.

Comply With Applicable State Law

The party seeking to excuse performance based on force majeure or Act of God should check into applicable state law. State law will control the application of those contract provisions. In some states, the Act of God event must be unforeseen, and the party seeking to invoke the force majeure clause must attempt to perform its contractual duties despite the incident. However, other states do not have those additional conditions on invoking the Act of God clause. The party claiming undue burden resulting from the force majeure event will have the burden of proof. Failure to comply with those state laws could put the non-performing party in breach of contract.

Understand Whether Performance Will Be Permanently Relieved Or Simply Delayed

Depending on the contract wording and the circumstances surrounding a particular case, the Act of God clause may not provide complete, permanent relief from contract performance. It may only allow the burdened party to delay performance and only until the force majeure event is terminated.

Mitigate Damages Resulting From Non-Performance

Road closed sign on a street. In some states, the Act of God event must be unforeseenThe burdened party should not simply walk away. The party has an affirmative obligation to mitigate the effects of non-performance. For example, the party may need to protect equipment from severe weather, secure premises against vandalism, provide notices to interested parties, and so forth.

Prepare To Refund Payment For The Value of Services Not Performed

In a case where the non-performing party has been paid for services not yet completed, some or all the funds will need to be returned to the other party. The contract may have language that addresses how that amount is to be determined.

Consult The Attorneys At KPPB LAW About Your Contract Questions

COVID-19 has disrupted many contractual arrangements around the country and caused significant economic damage to businesses. Protect your interests by working with experienced contract and dispute resolution attorneys at KPPB LAW. Contact KPPB LAW for help finding a practical resolution and to discuss your case.

If you are considering litigation related to a contract dispute, consider the value range of your matter with the investment of engaging an attorney to be sure your legal action makes fiscal and business sense.

Filed Under: Contract Disputes

Roy Banerjee profile picture
Roy Banerjee

Roy Banerjee helps defend, settle and pursue claims to protect your business interests. He is an accomplished business litigator who specializes in efficient resolution of real estate and business matters.

Legal Disclaimer*

Articles published by KPPB LAW are purely for educational purposes and provide generalized information of the topic(s) covered. These articles should not be considered as legal advice.

Please contact the attorneys at KPPB LAW for more information regarding your case.

Contact Us

Primary Sidebar

Ready to speak with an attorney?

Call Now!

Contact Us

Use the form below. We will review your message and respond in a timely manner.

info@kppblaw.com


Footer

Atlanta, Georgia

One Lakeside Commons
Suite 800
990 Hammond Drive
Atlanta, GA 30328
678-443-2244
[Corporate Office]

Gainesville, Virginia

7330 Heritage Village Plaza
Suite 201
Gainesville, VA 20155
703-594-4040

Chicago, IL


312-857-5263

New York, New York

12 East 49th Street
New York, NY 10017
203-875-0808

© 2023 KPPB LAW · All Rights Reserved · Legal Disclaimer

Website powered by 321 Web Marketing