New York force majeure law for vendors and service providers is brutal. Here’s why.
You need a list.
The doctrine will excuse performance under New York law only if the force majeure clause specifically includes the event or occurrence that prevents a party’s performance.
Without a list, the clause is basically a dead letter. This means force majeure clauses formulated like the following are no good if you are the vendor:
Neither party shall be responsible or liable to the other party, or be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term or obligation of this Agreement, if and for as long as such failure or delay arises from any cause beyond the reasonable control of that party.
During the pandemic, many businesses in New York with generic clauses like this one struggled to be excused from performance. Courts often ruled that unless the clause specifically mentioned “pandemics,” “epidemics,” or “government-ordered shutdowns,” the general “beyond reasonable control” language was insufficient. Vendors with more specific and detailed clauses fared better.
The list better be good.
As a general matter, under New York law, the clause will never be anything more than the list. Even if the clause is expansive in scope, and includes at the end a catch-all, “anything not previously mentioned still counts,” kind of clause, the list automatically brands the rest. It applies only to events of the same general kind or class as those specifically mentioned.
Even with the event listed, it doesn’t count if the event is foreseeable or within a party’s control.
Foreseeability is a strict requirement, regardless of what the clause says. Similarly, New York law reads into every force majeure provision the requirement that the invoking party did not have control over the force majeure event.
Few things in lived experience are truly unforeseeable, or truly outside one’s control. This sets a high bar for applicability.
Impossibility of performance is required.
Suppliers doubled their prices for inputs? Too bad.
Performance must have been rendered impossible by the event. Mere impracticality or unanticipated difficulty is not enough to excuse performance. Financial hardship (eg, increased prices, even by 100%) will not shield the vendor. New York law in this regard leans heavily on the common law doctrine of impossibility.
Even with the event listed, it doesn’t count if the obligation affected is fundamental.
Delays resulting from a breach of a fundamental obligation of the contract may not be excused, even with a robust clause that lists the specific event that proximately caused non-performance — and even if the event was unforeseeable and beyond one’s control.
This greatly limits the efficacy of force majeure clauses for the vendor or service provider.
California law is better for vendors on force majeure.
California law stands in stark contrast.
A list is not required. The quoted clause above would be effective. Under California law, the clause need not include a specific list of events to be enforceable. It can be broadly defined as “any cause beyond the reasonable control of the affected party,” provided the language of the clause is clear and consistent with the parties’ intent and the circumstances of the contract.
Also not required: proving literal impossibility. Rather, California courts apply the doctrine of commercial impracticability, in which a provider may be excused if the event renders performance unreasonably difficult or expensive such that it would be fundamentally unfair to enforce the contract. For a service provider facing a major supply chain disruption or a sudden, massive cost increase, this standard is much easier to meet than New York’s strict impossibility test.
Foreseeability and control are also handled much differently in California. California courts will qualify a listed event as excusing performance, regardless of whether it was unforeseeable at the time. Moreover, the control standard is more relaxed. California courts apply the “reasonable control” standard, focusing on “good faith” and “reasonable diligence.”
Yet another reason to avoid New York law for clients selling goods, services, content, or IP.
Find out more at Redline.
