With the recent flooding and power outages affecting businesses across the greater Toronto area, this seems to be an appropriate time to shed some light on the often used and perhaps underappreciated clause found in most, if not all, commercial contracts prepared by lawyers – the force majeure clause. This clause accounts for the possibility that various events out of the control of the parties – for example, floods, fires, prolonged shortage of energy supplies, or war – may impede their ability to perform their obligations under the contract. It generally excuses all parties from performing their obligations under a set list of circumstances and outlines the consequences of the circumstance lasting for an extended period of time. If it wasn’t for this (generally) standard clause, many business owners who have been unable to abide by the terms of their contracts this week as a result of the recent storm could be found liable for breach of contract.
Therefore, the next time you are negotiating a business contract, take a moment to read over the force majeure clause and appreciate its importance to your business.