One of the prime areas of concern for kitchen and bath companies with respect to the successful performance of a signed contract
is focused around manufacturing and shipping delays, which can create
liability and are rather commonplace throughout the industry.
Manufacturing and shipping delays affect small local companies as well
as large national companies, and everyone in between. In particular,
this winter’s snowstorms have created numerous shipping and
manufacturing delays for a large number of companies. As a matter of
fact, Amazon.com recently posted a statement on many of their items
indicating that because of inclement weather, many scheduled deliveries
were delayed.
The kitchen and bath industry differs vastly
from Amazon.com. Customers, including individuals, general contractors
or large construction companies, are always concerned about delivery
dates and deadlines. Quite often cabinets are ordered with a specific delivery date
that will allow other trades, such as plumbers and electricians, to
complete their tasks before the cabinets are installed. A fair amount
of litigation in the industry stems from manufacturing and delivery
delays. So how can you protect your company from such liability? The
answer is to use the “Force” in all of your agreements. This is not the
mystical “Force” of Star Wars but rather the force majeure clause.
USING THE FORCE
Force
majeure is a French word that literally means “superior or greater
force.” The force majeure clause serves to excuse a party from
liability if some unforeseen event beyond the control of that party
prevents it from performing its obligations under the contract. In
other words, a force majeure clause provides a means by which the
parties may anticipate in advance a condition that will make
performance impracticable. Such clause conditions a party’s duty to
perform upon the non-occurrence of some event beyond its control and
serious enough to interfere materially with performance.
Typically,
force majeure clauses cover natural disasters or other “Acts of God,”
war, or the failure of third parties, such as suppliers and
subcontractors, to perform their obligations to the contracting party.
It is important to remember that force majeure clauses are intended to
excuse a party only if the failure to perform could not be avoided by
the exercise of due care by that party.
BE SPECIFIC
When
creating your force majeure clause, it is beneficial if the clause sets
forth some specific examples of acts that will excuse performance under
the clause, such as wars, natural disasters, inclement weather and
other major events that are clearly outside a party’s control.
Inclusion of examples will help to make clear the parties’ intent that
such clauses are not intended to apply to excuse failures to perform
for reasons within the control of the parties.
A typical example of a force majeure clause is as follows:
“Neither
party shall be liable in damages or have the right to terminate this
Agreement for any reasonable delay or default in performing hereunder
if such delay or default is caused by conditions beyond its control
including, but not limited to Acts of God, Government restrictions
(including the denial or cancellation of any export or other necessary
license), wars, insurrections and/or any other cause beyond the
reasonable control of the party whose performance is affected.”
Yet another example is:
“Delivery
dates, when given, are approximate. Seller shall not be liable for any
reasonable delaying performance or failure to perform which is
attributable to any cause beyond its immediate control, including, but
not limited to, Acts of God, fire or other catastrophes, strikes,
pickets, civil or military authority, fabrications delays, inability to
obtain materials, transportation delays or other causes beyond its
control.”
In general, courts will enforce properly
constructed force majeure clauses. When analyzing the enforceability of
a force majeure clause, the courts will consider the contractual terms,
the surrounding circumstances and the purpose of the contract.
Notwithstanding the foregoing, the ultimate key to the enforceability
of a force majeure clause is that the supervening event which prevents
performance under the contract must be beyond the control of the
seller.
Using a force majeure clause in your contracts may
help your company avoid liability the next time Mother Nature decides
to muddle up your manufacturing or delivery schedules. While it is
recommended that you seek the advice of an attorney in preparing your
contracts, the sample clauses above can be incorporated into your
company’s contracts.
—Peter J. Lamont, Esq., is a commercial litigation attorney practicing at McCarthy & Jennerich
in Rutherford, NJ. He specializes in the representation of small- to
large-size companies in the building and design industry. To contact
him with questions and suggestions on topics for future articles,
please email him at [email protected].
Want more legal advice? Read the last Legal Aid column on starting the year right.
