Since the Oval Office transition in January – and the rapid shifts in law, policy, and economic uncertainty that followed – my colleagues and I frequently field a variation of the same question: Is this a force majeure under my contract?
Most often, the answer is not nearly as straightforward as the question. Providing an answer – to the extent we can – usually requires that we dig into the factual circumstances and analyze multiple interrelated contract provisions and sometimes also arcane common law doctrine that requires wiping the dust from old law school textbooks. And, as lawyers are ought to do, whatever answer we ultimately provide almost always starts with “it depends.”
Because uncertainty and change appear to be ongoing themes of the current political and economic landscape, having a basic understanding of contractual and legal lexicon relevant to the various doctrines that may excuse or modify a party’s performance obligation is critical. Those principles may include the following (and may also hark back to memories of the COVID-19 pandemic):
- Force majeure: These contract provisions – which sometimes use the term “force majeure” but often do not (the American Institute of Architects forms are a good example) – typically provide relief to one or both parties based on the occurrence of certain delineated events or sometimes, more ambiguously, events that are “beyond the party’s reasonable control.” Historically, force majeure provisions in construction contracts provide additional time for performance to the contractor, but not additional money. This shifted somewhat post-pandemic, as force majeure became more front-of-mind during negotiations.
- Change in law: These contract provisions similarly provide relief to one or both parties based on changes in applicable law – which may or may not be a defined term – that occur after contract execution and materially affect performance. During the pandemic, parties relied on change-in-law provisions to excuse or delay performance based on stay-at-home orders and others enacted at various levels of government intended to slow the spread of the coronavirus. Changes in tariff law and other executive orders may similarly trigger change-in-law provisions, though careful analysis is typically required.
- Impossibility or impracticability: Performance may be excused under common law principles when it becomes objectively impossible or economically impractical. For instance, a landowner who has entered into an agreement to lease their building on a future date may be excused from performance if the building is destroyed by fire prior to the lease date, rendering performance impossible. The bar for excusing performance under these doctrines is typically high, and generally requires objective evidence that performance as originally anticipated is rendered impossible or economically impractical.
- Frustration of purpose: Performance may also be excused when an unexpected event occurs – the non-occurrence of which had been assumed by the parties – and frustrates the entire purpose of the contract. This typically requires evidence that the contract was formed with a specific purpose, that the occurrence of an unanticipated event frustrates that purpose, and the non-occurrence of that event was a basic assumption underlying the initial formation of the contract.
- UCC: Contracts involving the sale of goods may be subject to the Uniform Commercial Code (UCC) as adopted in the state whose law governs the contract. The UCC has codified the impracticability doctrine, which may excuse a seller’s performance when certain circumstances are satisfied.
- Anticipatory repudiation: There are various other contractual principles that may in certain circumstances excuse a party from performing, including anticipatory repudiation. For instance, if party A to a contract makes a statement that it does not intend to perform, party B may then be excused from its obligation to perform.
In applying these principles, courts (and arbitrators) will first and foremost study the parties’ contract to see whether they agree how the risk of the event at issue would be handled prior to the dispute. If they agree, courts (and arbitrators) will typically apply the contractual remedy. But if the parties do not agree – or if there is ambiguity – then the court (or arbitrator) will look to their toolbox of other doctrines that may excuse, delay, or otherwise alter a party’s obligation to perform. And, of course, the facts of the particular circumstance and various equities at stake will weigh heavy in the decision maker’s consideration and ultimate decision.
Originally posted to the Oregon Daily Journal of Commerce on May 15, 2025.
