Don't Rely on Boilerplate 'Force Majeure' Clause

It’s among the least appreciated parts of the lease. But while rent, renewal, and other business terms command most of the attention, the so-called force majeure clause takes center stage when disasters occur. It’s at that point that both landlords and tenants recognize the importance of the clause and kick themselves for using generic boilerplate language rather than making the effort to negotiate a force majeure clause that makes sense for their particular situation.

The force majeure clause excuses a party to a lease from performing its duties if a catastrophic event beyond its control happens. It’s like an insurance policy you get but hope to never use; but when it does come into play, the drafting of the terms becomes a five-, six-, or seven-figure issue.

If you don’t believe it, just ask One World Trade Center. Its pre-9/11 lease included what was then a standard clause listing “acts of war” as a force majeure event. One of the building’s largest tenants, a securities firm, relied on the clause in a bid to recover the “front-loaded” rent it paid just before the terrorist attacks of Sept. 11, 2001. But the court said no dice, finding that terrorist attacks didn’t count as “acts of war.” These were “sophisticated commercial tenants” that “bargained away their right to hold the lessor liable for nonperformance in the face of the tragic, unanticipated events which destroyed the building,” the court concluded [One World Trade Ctr. LLC v. Cantor Fitzgerald Sec., 2004 NY Slip Op 24444].

Those who rely on the boilerplate do so at their own peril. So, take the time to negotiate your own terms. For eight key questions you must consider to come away with the right clause, see “Beyond the Boilerplate: How to Negotiate the Force Majeure Clause,” available to subscribers here.