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Contracts and "Acts of God"

Contracts

This article discusses contract liability if events beyond your control cause a breach of contract.

Here, learn about the contract law concept of "force majeure" and how it might help you get out of a contract. A force majeure event could be something like a big, unexpected natural disaster. These events can be a good reason for being unable to do something you promised to do in a contract.

What is a "force majeure" or "act of God" clause?

Many contracts include a "force majeure" or "act of God" clause. A force majeure clause is a part of a contract that says if something unexpected happens, one or both parties may be excused from doing what the contract says they should do.

Texas law does not provide one universally accepted example of a force majeure clause. Still, specific events, such as fire, storms, acts of God, or orders by governmental authorities, can trigger force majeure. 

Do force majeure clauses impact commercial real estate contracts?

Most commercial contracts, including most leases, have a force majeure clause. That is, if something unexpected happens that makes it hard or impossible for the landlord or tenant to do what they promised in the lease, they don't have to do it.

In most cases, the tenant must pay rent even if there is a force majeure. Some leases have language that says the tenant can't use an "act of God" or force majeure as an excuse for not paying rent. If the lease doesn't have this language, the tenant might be able to use the force majeure clause to avoid paying rent.

In general, a force majeure excuses both the landlord and tenant from other things they promised to do in the lease, but only for as long as the unexpected event makes it hard or impossible to do those things. Talk to a lawyer if you have a lease and are unsure how it works in a situation like this. See if there are programs from the government or other organizations that can help with rent or other costs.

What are my other options if I don't have a force majeure clause in my contract?

If you don't have a force majeure clause in your contract, you can't use a force majeure defense. But you can use other defenses based on Texas law.  

One example is the defense of "impossibility of performance." If something happens that makes it impossible or difficult to do what the contract says, you might not have to do it. For example, if a law or court order changes and makes it impossible to do what the contract says, you might not have to do it. 

A court will have to decide if it was something that the parties thought might happen when they made the contract. If you want to use this defense, you will have to show that you didn't cause the problem and that it wasn't something you thought might happen when you made the contract. 

What if I had a contract for the sale of goods?

If the contract involves the sale of goods, another way to use force majeure language is in Article 2 of the Uniform Commercial Code, which is in Chapter 2 of the Texas Business and Commerce Code.

For these contracts, a party could argue that any failure to perform is excused by Texas Business and Commerce Code 2.615. That section says that a delay in delivery or non-delivery by a seller is not a breach of contract if it becomes impractical due to an unexpected event that was assumed would not happen when the contract was made. If this happens, the seller must inform the buyer about the delay or non-delivery.

Also, if the seller can deliver only some of the goods promised and needs to deliver to other parties, they can be excused for non-performance under Section 2.615 only if the available products are shared fairly and reasonably among all the customers.

Our contract doesn't address pandemics. What can I do?

Before the covid pandemic, it would have been unlikely that a force majeure clause in a contract would use a global pandemic as an excuse for performance.

Fulfilling contracts made before the pandemic might have become difficult or impossible. If a pandemic-related reason doesn't match the specific types of force majeure listed in the contract, you might need to rely on the "catch-all language" in the clause to excuse performance.

Texas courts have held that a party must show that:

  1. The incident in question falls into the catch-all language of the force majeure clause, and
  2. The parties did not foresee the event in question when they agreed to the contract.

What will courts consider when deciding if a force majeure clause applies?

The courts will try to understand what the parties meant in the contract to decide if a force majeure clause applies. Questions a court might ask include:

  • Was it impossible to perform under the contract because of a government order (like a shelter-in-place order)?
  • Was it impossible to perform under the contract because of other circumstances created by or related to the disaster?
  • Was the disaster foreseeable when the parties made the contract?

After the covid-19 pandemic, some contracts might now include clauses that specifically mention pandemics. Alternatively, they might use more general language that covers pandemics.

Should I get an attorney?

Consult a lawyer when evaluating your contractual rights and obligations, especially if you want to enforce a force majeure clause or use a defense like impossibility.

The remedies and defenses discussed in this article depend on detailed questions and Texas contract law analysis. There is no one-size-fits-all solution for every contract. Talking with a lawyer about your contract can help you minimize risk and better understand your rights in a changing situation like the covid-19 pandemic. The pandemic was a unique situation, and courts responded to it in different ways.

Read How to Select a Lawyer and learn about limited-scope representation (a way to make hiring a lawyer more affordable because you only pay for certain legal services).

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