Sara Subcontractor was hired by Jerry General Contractor to construct four masonry walls for the Citizen Canine dog kennel. Prior to construction, the parties signed a contract and agreed that Sara Subcontractor would be paid $100,000 upon the erection of the 4 walls. After erecting three of the walls, a freak tornado blows through the job site, knocking down the three walls. Jerry General insists that Sara Contractor rebuild the walls at her cost. Sara Subcontractor refuses, stating that the winds were an act of God and that she wants additional monies to rebuild the three walls. Who is correct?
It depends upon the parties’ agreement. “Force majeure” was historically a common law doctrine (developed by court precedent as opposed to a statute) used to describe circumstances like an act of God (e.g. earthquake or tornado) or an act of man (e.g. war or strike) that would excuse one party’s performance, or modify obligations, under a contact. Under current Texas law, however, Sara Subcontractor’s duty to perform her contractual obligations is absolute in the absence of an express contractual force majeure clause.
Accordingly, the answer to who is liable will be found within the terms of the contract. Simply because a contract is more burdensome to perform than originally anticipated does not excuse its performance. If there is no force majeure clause, Sara Subcontractor’s performance under the agreement is absolute and she will be responsible for rebuilding the walls even if she must do so at an additional cost due to an act of God.
Tilting the Scales in Your Favor
Force majeure clauses allow parties to allocate risk and specify what events may suspend or excuse performance. Do not assume that your company’s performance under a contract will be excused by some horrific, unforeseen event. Courts will look to the four corners of the parties’ agreement to determine whether a parties’ contractual obligation will be excused due to an event. An event is not a force majeure event unless the parties’ agreement says that it is. Accordingly, include force majeure clauses in your agreements and customize those clauses to govern potential risks.