A commercial lease may include a force majeure clause

| Apr 18, 2021 | Business Litigation |

Contracts containing a force majeure clause may protect a business owner’s interests if he or she experiences an unpredictable natural disaster. As described by the American Bar Association, a commercial lease may also contain terms describing how a natural force such as an earthquake or a flood may require a business tenant to continue paying rent as agreed.

As noted by the U.S. Chamber of Commerce, some contracts may include a clause that provides a tenant with the right to renegotiate a lease. The clause, however, must specify which events trigger the release of either party from the agreement’s original obligations.

A contract may define specific events as caused by force majeure

Events occurring outside of a party’s control may fall within a force majeure clause. Generally, a contract describes natural disasters as triggering events. This may include damage caused by severe weather, mudslides, tsunamis or wildfires.

Some business owners may wish to protect themselves from human disruptions such as an act of war, terrorism or government sanctions. As reported by Fast Company magazine, labor strikes and other manmade emergencies may also qualify as force majeure events.

Renegotiation may bring more positive results than a termination

A property owner in Southern California may prefer a contract that allows tenants to renegotiate a lease. A tenant claiming that force majeure renders a contract void means that an owner may need to find a replacement tenant quickly. Until finding a new one, however, the owner may have the responsibility of maintaining a property’s expenses.

While not every party may agree to terminate, reduce or postpone contractual obligations, an agreement may outline ways to renegotiate terms during an unpredictable period. If a business temporarily experiences a significant reduction in revenue, an owner may wish to find a way to uphold a contract instead of facing a legal action.

FindLaw Network