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Drafting a Fair Force Majeure Provision In the Wake of COVID-19
Now that we have endured more than one year of living in a pandemic, the question arises: how has it affected the manner in which commercial real estate transactions should be negotiated and documented? The negative impact on the already distressed retail and office markets is self-evident. There is little need to maintain a storefront if customers either cannot or will not shop there. The need for facetime in an office environment has proven to be over-stated. If a tenant's business is no longer viable for reasons beyond its control, how should that circumstance be addressed in a lease?
The term force majeure literally refers to a "superior force" — one that is "neither anticipated nor controlled." New Jersey Dept. of Envtl. Prot. v. Bayshore Reg'l Sewerage Auth., 340 N.J. Super. 166, 168 n.1 (App. Div. 2001). A force majeure clause provides a means by which contracting parties contemplate in advance certain uncontrollable events or effects that will render performance impracticable and conditions a party's obligation to perform upon the non-occurrence of such enumerated events. Thus, in drafting this common contractual term, at least some degree of anticipation is required.
While most commercial leases contain force majeure clauses, they are not often the subject of intense negotiations. Force majeure is typically defined to include acts beyond a party's reasonable control: inclement weather, strikes and labor shortages, governmental states of emergency, fire, flood or other casualty to name a few. Some clauses permit only the landlord to invoke an event of force majeure to excuse performance; others apply to both landlord and tenant and may be invoked to excuse performance of obligations other than the payment of rent. These are generally considered to be short-term events.
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