Contract Corner: What Do You Know About the Force Majeure Clause in Your IT Services Contract?
Your experiences may be different, but the excusable events that we see in force majeure clauses vary widely—from specific events that could not have been prevented to any event beyond a party’s reasonable control. We spend a lot of time thinking about which events—from a customer’s perspective in an IT services contract—should be excused and under what circumstances. Set forth below are three questions that should help in drafting force majeure clauses:
1. What is a “force majeure event”?
We often ponder—because we don’t have any outside hobbies—what it means if a force majeure clause is limited to something beyond someone’s control (without further obligations to prevent nonperformance). Could it possibly mean that a vendor is excused from performing for something as simple as an employee’s car breaking down and that person not showing up for work? We acknowledge that not all transactions are equal, and some require more attention to force majeure clauses than others (and with a staff augmentation deal for a specific individual, a car breaking down may be reasonable). However, for more complex IT services contracts, where there is leveraged staffing and broader services, it is likely reasonable to limit the scope of a force majeure event. We often suggest limiting force majeure events, if possible, to “act of God” events, such as earthquakes, hurricanes, and other natural disasters as well as “similar” causes that are beyond the reasonable control of the affected party. We also, in some cases, expressly define certain events that are not force majeure events.
2. A force majeure event occurs. Is that enough to be excused?
After a force majeure event, consider whether the vendor should have taken or needs to take certain actions in order to be excused. For example:
Should the vendor be required to have taken commercially reasonable actions to have prevented the impact of the event (if foreseeable)?
After the occurrence, should the vendor be required to use commercially reasonable efforts to recommence performance to the extent reasonably possible without delay?
3. How does force majeure work with disaster recovery obligations?
Consider whether a force majeure clause excuses all performance or whether the occurrence of a force majeure event should not excuse the vendor’s obligation to implement disaster recovery/business continuity obligations and to restore services (or critical services). If a vendor is not excused from implementing disaster recovery/business continuity plans in the event of a force majeure event, you should think about calling this out in your contract. That may be when you need disaster recovery/business continuity the most.
This post is part of our recurring “Contract Corner” series, which provides analysis of specific contract terms and clauses that may raise particular issues or problems. Check out our May 28 post for more on contracts, and be on the lookout for future posts in the series.