When managing your business’s day-to-day operations, extreme events like natural disasters or global pandemics may be the last thing on your mind. However, when they happen, it can disrupt your entire business operation. Suddenly, you’re faced with many unexpected challenges and questions. Do you still have to pay rent while all of this is happening? This is where understanding force majeure clauses becomes crucial for you.
You can find force majeure clauses in many commercial leases. These provisions excuse you or your landlord from fulfilling lease obligations when extraordinary, uncontrollable events occur. However, courts usually have a narrow interpretation of force majeure clauses. This means they look closely at the exact wording in your lease and only apply the clause to situations mentioned explicitly in it.
What counts as a force majeure event?
Force majeure events typically include:
- Natural disasters, such as earthquakes, floods or hurricanes, which can make it impossible to use or access a property
- Wars or acts of terrorism, which can disrupt business operations and supply chains
- Government actions, like changes in laws or regulations, which might prevent you from fulfilling your obligations
- Labor disputes, including strikes or lockouts, which can halt your business activities
- Epidemics or pandemics, as we’ve seen with COVID-19, which can force businesses to close or significantly alter their operations
However, keep in mind that while these are common examples, the specific events covered by a force majeure clause depend on the exact wording in your lease. Courts don’t consider all challenging situations as force majeure events. They often exclude economic issues, such as market downturns or financial difficulties. For example, increased competition or a recession usually won’t excuse you from your lease obligations.
What other factors do courts consider?
Washington courts might look at several factors aside from the lease wording in force majeure disputes. They consider:
- Whether the event was truly unforeseeable and outside the claiming party’s control
- If the event actually prevented the party from fulfilling their obligations, not just made it more difficult or expensive
- Whether the claiming party took reasonable steps to mitigate the impact of the event
Moreover, courts may consider the overall fairness of enforcing or excusing the contract in light of the circumstances.
Commercial lease disputes can be challenging
Unsure about your rights and obligations under a force majeure clause? A real estate attorney can help you understand your position and explore your options.