The interruption caused by Eyjafjallajokull has been devastating.  Putting aside the personal inconvenience and expense suffered by airlines, passengers and the travel and vacation industries, the consequence to other businesses has been far reaching — missed deliveries and shipments, upset production schedules, canceled meetings, delayed or canceled business deals, and more.  Believe it or not,  one source indicates that Eyjafjallajokull is not even among the ten most dangerous volcanoes in Europe, outranked by Vesuvius, Campi Flegrie, and Etna in Itally, Agua de Pau, Fumas and Sete Cidades in the Azores and Hekla in Iceland, among others.

So how do businesses deal with events that they cannot predict or control? In the world of contracts, it’s the “force majeure” clause that protects the parties when they cannot perform because of unforeseen events.  “Force majeure” literally means “greater force.”  A typical force majeure clause reads:

Company shall not be responsible for damages by reason of any strike, war, riot, insurrection, civil commotion, fire, flood, accident, storm, or any Act of God or any other causes beyond the control of the Company.

Pennsylvania courts — the few that have considered the force majeure clause — have held that such provisions will only protect parties whose performance is prevented by events beyond the “reasonable control” of the parties.  Certainly, war, floods, earthquakes, and volcanoes fall under this category.

These are easy cases, but how will courts view situations where a party’s performance is only frustrated by natural events, not prevented; or when government regulators prevent a party to perform under its contract (Rohm & Haas Co. v. Crompton Corp., Kaplan v. Cablevision of Pa); or if performance is prevented by a labor strike (Aquila, Inc. v. CW Mining)?  In these situations, courts tell us that they will look to the intent of the party as expressed by the language of the force majeure clause.  Does the language of the clause protect a party who partially performs? Does it specifically include failure to perform caused by government regulations or labor strikes?  Make sure your contracts contain a force majeure clause and make sure it is specific enough to protect you from those rare events that affect your industry. Unfortunately, nobody has a crystal ball.

(Thanks to Arnold Winter; photo by David Karnå, licensed under Creative Commons License)

— Adam G. Garson, Esq.