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How does force majeure affect contracts?

On Behalf of | Oct 21, 2020 | business litigation

Business litigation isn’t particularly uncommon, but there is a new form that is taking the country by storm: Landlords who are suing businesses for not paying rent.

Whenever there is a time that businesses are struggling, the fact is that they may struggle to pay rent. Those commercial leases may be high-dollar leases, too, which is frustrating for landlords and the business owners alike.

Sometimes, businesses are issued pauses on having to pay rent. For example, this year, the severe hit to the economy led to some businesses being unable to remain open. They may seek the use of force majeure, which is an act of God provision allowing for a party’s performance to be excused due to exceptional circumstances. It could be a result of a natural disaster, for example, that a company cannot pay rent. That behavior may be excused by a landlord, or it could result in the termination of a contract without penalty.

It’s typical for businesses to cancel contracts due to force majeure clauses. The courts are cautious in how they interpret these clauses, so they are not often used. However, if a tornado tears through Louisville or a natural disaster results in businesses shutting down, then it is one clause that may come up and be used to help get businesses out of their contracts legally.

If you have this kind of clause in a business contract and you are trying to get out of it, you may be able to show that it applies to your circumstances. If so, then you may be able to get out of the contract as a courtesy thanks to the clause.