Is There a 'Legal' Way to Get Out of a Contract?

Guest post by: Marijo McCarthy
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What's An Opinion, Anyway? - By Marijo McCarthy

The short answer is "Yes" -- a well-drafted contract protects the parties from a variety of situations where it is advisable for one or both parties to end the relationship [lack of payment for services rendered being the most obvious]. Of course, the "right" answer to this question often depends on which side of the table you find yourself!

Have you ever been asked to sign a contract which included a "force majeure" clause? Does the average business owner even know what that means or, more importantly, understand the implications of the clause?!

Black's Law Dictionary defines "force majeure" as an event or effect that can be neither anticipated nor controlled. The term includes both acts of nature (e.g., floods and hurricanes) and acts of people (e.g., riots, strikes, and wars). In simple English, force majeure is an unexpected and disruptive event that may operate to excuse a party from performance under a contract.

However, it is the substance of what's included in the clause which can be the show-stopper… and should require serious review and consideration.

The party from whom performance is expected wants a simple force majeure provision which excuses performance due to a litany of excuses. For example:

Force Majeure. Consultant shall not be liable for any failure or delay in its performance under this Agreement due to causes beyond its reasonable control including, without limitation, labor strikes or shortages, riots, insurrection, fires, flood, storm, explosions, acts of God, war, domestic or foreign terrorism, governmental action, labor conditions, earthquakes and material shortages.

On the other hand, the party who is looking to another for performance wants to be much more specific on how, when and why this excuse can be enforced. For example:

Force Majeure shall mean any circumstance that is not within the reasonable control, directly or indirectly, of the Party affected, but only if and to the extent that (i) such circumstance, despite the exercise of reasonable diligence, cannot be (or be caused to be) prevented, avoided, or removed by such Party or Person, (ii) such event materially adversely affects the ability of such Party to perform its obligations under this Agreement, and such Party has taken all reasonable precautions, due care and reasonable alternative measures in order to avoid the effect of such event on such Party's ability to perform its obligations under this Agreement and to mitigate the consequences thereof, and (iii) such event is not the direct or indirect result of the failure of such Party to perform any of its obligations hereunder; provided, however, that Force Majeure shall not include:

the late payment of money;

the unavailability of labor or the late delivery of contractor's equipment;

the late performance by the Party claiming Force Majeure caused by such Party's failure to strictly comply with the requirements of this Agreement;

submission of documents and/or drawings for approval by the engineer at such a time that does not leave sufficient time to permit review thereof within the time periods provided for in this Agreement; or

delays resulting from reasonably foreseeable unfavorable weather or reasonably foreseeable unsuitable ground or sea conditions or other similar reasonably foreseeable adverse conditions.

Bottom line? Don't sign off on the so-called "boilerplate" until you know what it means and how it affects you. It could have substantial positive or negative consequences when that "force majeure" hits.

Remember, being able to legally "get out of a contract" works both ways, so give that some thought as you consider force majeure provisions.

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What's An Opinion, Anyway? - By Marijo McCarthy

About the Author: Marijo McCarthy

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Marijo McCarthy is principal of Widett and McCarthy, a Boston-area law firm that helps small business owners grow their businesses with pragmatic legal advice, mentoring and a solid team of professional advisors.
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