By Corey B. Stern, partner at Chitkowski Law Offices
During this time of crises, a Contractor typically reviews its contracts to determine what, if any flexibility, is allowed. A clause that allows for contract modifications and removes liabilities, under such extreme circumstances is called a Force Majeure clause.
In a typical Force Majeure clause, a party is not required to perform its obligations or be liable for any loss/damages resulting from the intervening factor. The “intervening factor” is generally defined as an act of God; strikes; riot; fire/other casualty; or legal requirements.
In Illinois, the courts have interpreted Force Majeure clauses under the legal theory of the doctrine of legal impossibility or impossible performance, which excuses the performance of a contract only when performance is rendered objectively impossible as a result of the subject matter being destroyed or by operation of law. This legal theory is applied narrowly and does not apply when a the party who is not acting has the power to remove the obstacle to performance. Examples of legal impossibility are when legal restrictions prevent your performance or when the subject matter of the contract has been destroyed.
Currently, the State of Illinois’ Executive Orders and local municipalities’ ordinances may be partially or totally preventing your business from operating. A Court may consider this to be a legal requirement preventing you from operating your business or performing the specific contract.
In reviewing whether a Force Majeure clause excuses your contractual obligations, a party should consider the following factors:
- The nature of your business operations?
- Does the intervening factor partially or completely prevent you from conducting your business operations or the contract?
- Do you have the power to remove the intervening factor?
- Was the intervening factor objectively reasonably foreseeable?
- Is the intervening factor temporary or permanent?
For more information, contact the Home Builders Association of Greater Chicago.