Force Majeure Clause In Construction Contract: Everything You Need to Know
A force majeure clause in construction contract will indicate that one party is excused from performing under the contract. 3 min read
2. Construction Contracts: An Overview
3. Requirements for Force Majeure Clause
4. Four Components in a Force Majeure Clause
5. Triggering Events and Duration
Updated October 20, 2020
Force Majeure Clause in Construction Contract
A force majeure clause in construction contract will indicate that one party is excused from performing under the contract. The clause will identify that an unforeseen event occurring during the duration of the construction contract will excuse the party from performing. Such events cannot be controlled by either party, without any fault or negligence of the party that should be performing under the contract.
Construction Contracts: An Overview
The main reason to draft a formal construction contract is to indicate all essential terms and conditions of the construction project in writing. This includes the length of the project, costs, materials, limitations, and other important provisions.
Another purpose of formalizing a construction contract is to allocate risk, which is why it is important to include force majeure clauses in such contracts. For example, if an unforeseen weather event occurs, such as a hurricane, flood, tornado, or windstorm, then the continuation of performance under the contract will be excused, which is exactly what the force majeure clause states in the contract itself.
If, however, the clause is not included in the contract, then the party hiring the construction company to complete the job could potentially file a legal suit against the construction company for failing to finish the job on time.
In addition to unforeseen weather events, the force majeure clause could cover other events, such as a shortage of materials. For example, if the contracting company can’t obtain the proper amount of materials due to a shortage of steel in the steel industry, then the contracting company cannot be held liable.
Requirements for Force Majeure Clause
- The event must be beyond the control of the parties
- The event either precludes or postpones performance under the contract
- The triggering event makes performing under the contract more problematic or more expensive
- The claiming party wasn’t at fault or negligent
- The party wanting to trigger the force majeure clause has acted diligently to try to mitigate the event from occurring
Four Components in a Force Majeure Clause
When drafting the clause, there are four components that should be included as follows:
- An overview of the type of event that will trigger force majeure, i.e., hurricane, flood, etc.
- The length of the condition, i.e., how long the hurricane lasted
- A description indicating how the force majeure is to be communicated to the other party
- The obligation of both parties if a force majeure event occurs, i.e., the subcontractor’s performance will be excused or delayed
Triggering Events and Duration
Some of the typical occasions that will trigger force majeure include flood, fire, war, government orders, explosion, lightning, earthquakes, etc. The length of the occurrence must be specifically identified in the construction agreement. Generally, it corresponds to the overall duration of the contract.
The clause itself will also include an obligation to diminish the risk, as the claiming party will need to act with diligence to remedy the event. However, it is clear the claiming party cannot remedy a naturally occurring event like a flood or fire. While this cannot be mitigated, the question generally turns to whether or not the claiming party has to mitigate the effects of the event itself.
The notification is a condition precedent in declaring the force majeure. Generally, the clause itself will include how the other party will be notified of the triggered event. When the notification is properly given, force majeure protection will commence. Keep in mind that improper notification could result in the force majeure clause not being triggered, and the construction party could end up being liable, even when the party wouldn’t otherwise be liable.
An example would be if a flood occurs, and the construction company can no longer perform under the contract temporarily, the construction company must notify the other party that it cannot perform under the contract for the time being, which will cause a delay in the completion of the project.
If you need help learning more about the force majeure clause in a construction contract, or if you need legal help to identify whether or not the force majeure clause has been triggered, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.