What’s At Risk When Invoking A Force Majeure Clause?

Beginning April 1, 2020, Governor Tom Wolf issued a statewide stay-at-home policy for Pennsylvania in an effort to slow the spread of the COVID-19 illness. As a result, many businesses have been forced to cease operations, making it difficult or impossible to uphold their agreements.

Governor Wolf’s issuance of a statewide stay-at home policy and halt to all non-life sustaining businesses may very well qualify as an unforeseeable act of Government that permits parties to invoke force majeure clauses, so long as the clause is drafted into the contract.

Considerations For Invoking a Potential Force Majeure

However, as businesses are reviewing and reevaluating the terms of their contracts, Pennsylvania businesses may find that invoking force majeure clauses comes with a tall burden of proof. For contracts lacking express force majeure clauses, Pennsylvania case law historically has not provided broad interpretation of contracts to imply a force majeure clause when applicable.

There is relatively sparse Pennsylvania case law addressing force majeure clauses. In Martin v. PA Department of Environmental Resources, the Superior Court stated:

In order to use a force majeure clause as an excuse for non-performance, the event alleged as an excuse must have been beyond the party’s control and not due to any fault or negligence by the non-performing party. Furthermore, the non-performing party has the burden of proof as well as a duty to show what action was taken to perform the contract, regardless of the occurrence of the excuse.

As indicated by the Court in Martin, Pennsylvania courts are reluctant to enforce force majeure clauses, and do so only after the party wishing to enforce the clause has taken reasonable action to perform.

Likewise, iff the contract does not contain a force majeure clause, courts are reluctant to read such a clause into the contract. In Steuart v. McChesney, the Pennsylvania Supreme Court stated that the court will look to what is expressly contained in the contract itself, citing 17 A C.J.S. Contracts § 296(3):

The court may not rewrite the contract for the purpose of accomplishing that which, in its opinion, may appear proper, or, on general principles of abstract justice . . . make for [the parties] a better contract than they chose, or saw fit, to make for themselves, or remake a contract, under the guise of construction, because it later appears that a different agreement should have been consummated in the first instance. . . .

Therefore, if the contract does not contain an express force majeure clause, Pennsylvania courts are unlikely to “rewrite” the contract and recognize an implied force majeure.

If the contract does not include an express force majeure clause, Pennsylvania case law allows for the common law defense of impossibility of performance. In such cases, businesses will again find an up-hill battle when it comes to burden of proof.

The decision to invoke either force majeure or impossibility of performance should not be taken lightly, and businesses should understand what’s at risk before doing so.

Potential for Invoking the “Impossibility of Performance”

If the contract does not contain an express force majeure clause, Pennsylvania case law allows for the defense of impossibility of performance the unforeseeable event was not addressed expressly in the contract. However, similar to invocation of force majeure, Pennsylvania courts are reluctant to allow impossibility of performance, and require a high burden from those invoking the defense.

In Moore et al v. Whitty, the Pennsylvania Supreme Court stated “mere inconvenience” does not allow for a party to be excused from contractual obligations. The Court elaborated:

[W]here performance becomes difficult or impossible by reason of something occurring subsequent to the contract, the promisor is not thereby discharged if it appears that the thing to be done is lawful and possible in itself, inasmuch as it is his duty, if he wishes to be excused from performance in event of such contingency arising, to provide for that situation in his contract. Contingencies not provided against will not ordinarily excuse performance.

Clearly, Pennsylvania courts place a high burden on the party invoking the defense focusing on the question of foreseeability.

Likewise, the courts require the non-performing party to exhaust all reasonable efforts before failing to perform. Just how exhaustive must those efforts be? According to the Court in Moore, “A contract to perform an impossible thing may be void; but it never is impossible to procure and deliver an article of commerce which may be had in the market in some quarter of the world.”

Therefore, a business should be prepared to prove that the event was not reasonably foreseeable, and that it has made all reasonable efforts to deliver on the contract—including obtaining replacement goods available anywhere in the world, before invoking the impossibility of performance defense.