- Force majeure clauses are designed to leave parties with an out when an unforeseen issue arises.
- Its important to draft them with specificity and reasonableness to be effective.
- By doing so, you can ensure that both parties to the commercial real estate lease are reasonably protected against unknown impediments.
Remember the good old days of commercial real estate? When the biggest worry in a commercial lease negotiation was finding parking for your food truck after closing a sweet deal? Well, move over, parking woes – force majeure clauses are taking the stage, center spotlight, and belting out a chorus of legal uncertainty in the wake of pandemics and other unforeseen events.
Crafting and interpreting force majeure clauses in today’s changing world can be very difficult. There is a lot of confusion about them and that can lead to a mess when the unthinkable actually happens. So lets talk about them.
What is a Force Majeure Clause?
A force majeure clause is basically a clause in a contract that often relieves the parties of their obligations under the agreement if something unforeseen happens that frustrates the purpose of the agreement. Sounds easy, right? Its not. There are a lot of moving parts that have to be interpreted and can lead to large disagreements.
A perfect example of this is the COVID pandemic. It sent the commercial real estate world into a tailspin, with businesses and landlords caught in a tug-of-war over rent payments, lease obligations, and the meaning of “unforeseeable event.” This is where those force majeure clauses came under intense scrutiny. Did they cover pandemics? Were they specific enough? Did they offer a fair escape hatch for both parties? It was a mess that is still being worked out today.
Crafting Clauses for the Future
So, how do we avoid similar legal limbo in the future? Here are some best practices for crafting and interpreting force majeure clauses in your Austin commercial lease:
- Specificity is Key: Don’t be vague. Spell out specific events that qualify as force majeure, including pandemics, natural disasters, government shutdowns, and technological blackouts. Think of it like packing a disaster preparedness kit for your lease – the more you have in there, the better equipped you’ll be.
- Reasonableness Reigns Supreme: Even with a list of specific events, include language requiring the event to be “unforeseeable” and “beyond the reasonable control” of either party. This adds a layer of fairness and prevents someone from claiming a surprise birthday party as a force majeure event (yes, that actually happened).
- The Devil’s in the Details: Don’t just list events – outline the consequences. Specify whether obligations are suspended, excused, or modified when a force majeure event occurs. Will rent be prorated? Lease terms extended? Be clear and specific to avoid future misunderstandings.
- Communication is King: When the unexpected strikes, don’t hide under your Stetson hat. Open communication is crucial. Notify the other party promptly about the event and its impact on your lease obligations. Remember, collaboration is key, not a legal showdown at high noon.
Interpreting Current Clauses
But what do we do about current leases with old force majeure clauses? Here are some tips for interpreting it in the age of pandemics:
- Look at the Language: Start by examining the specific language used in the clause. Are the listed events broad or specific? How is “unforeseeable” defined? Are there any ambiguities that need clarification?
- Consider Context: Don’t read the clause in a vacuum. Think about the circumstances surrounding the negotiation of the lease, the type of property involved, and the current market conditions. This context can help you interpret the clause in a way that’s fair and equitable.
- Seek Guidance: If you’re unsure about the clause’s meaning, don’t hesitate to seek legal advice. A qualified commercial real estate attorney can help you navigate the nuances of the language and determine your rights and obligations under the clause.
Force majeure clauses ideally are not weapons to be wielded in anger, but tools to be used constructively in times of crisis. By crafting them carefully and interpreting them with reasonableness, you can ensure that your Texas commercial lease weathers any storm, pandemic or otherwise.