Force Majeure and Acts of God: Excusable Delay in Construction Contracts
A train engine pulling boxcars slogs through feet of standing water—its tracks entirely submerged. Ice, trash, and debris floats aimlessly down canals that had once been neighborhood streets. Entire towns have become islands, cut off from surrounding land by the water spilling out over the banks of the Elkhorn, Platte, and Missouri Rivers. These are the scenes that defined the historic flooding that decimated Eastern Nebraska last year. An unusually large amount of late winter snow, combined with temperatures just high enough to melt the snow but just low enough to keep the soil frozen, resulted in flooding described by Nebraska’s governor as “the most devastating” in the state’s history. If ever there were an event amounting to an “act of God,” surely this was it.
In the world of construction contracts, terms referencing an “act of God” are commonplace. “Acts of God”—also known as force majeure events—are natural disasters (or other destructive events) which are utterly outside of human control. Some common examples of acts of God include the likes of hurricanes, earthquakes, tornados, and tsunamis. Catastrophic flooding may also constitute an act of God where flooding in a given area is unusual or is dramatically worse than could have been reasonably anticipated—just like the flooding that struck Eastern Nebraska in March of 2019.
The term “act of God” usually appears in a contract to reserve some circumstances in which a party will be excused for failing to fulfill its duties under the contract. Put another way, these “act of God clauses” excuse some failure by a contracting party which would otherwise constitute a material breach of the contract. In essence, an act of God clause says, “since this unusual, unpreventable, and unavoidable event occurred, preventing me from fulfilling my duties under this contract, I should be excused from having to perform.” An example of an act of God clause in action may be illustrated by the following example.
Two parties—lets call them Builder and Owner—contract to build a house on Owner’s parcel of land. The contract between Builder and Owner specifies that “Builder shall complete the house by noon on the first day in July, barring the occurrence of some unforeseen "act of God.” After working diligently on the house all summer long, Builder, on June 30, is horrified to learn that a tornado has torn through her worksite, uprooting the (nearly completed) house and setting the project back several months. The next afternoon, Owner arrives at his property and is furious to find nothing but a pile of rubble. In this circumstance, a contract containing a properly drafted act of God clause would protect Builder from liability to Owner for technically breaching their contract.
Act of God clauses, like the one in the example above, help to shield parties from liability where the fulfillment of their end of a bargain has been rendered impractical, impossible, or even illegal by circumstances beyond their control. As such, these clauses are essential to any construction contract. Without them, contracting parties must rely upon the “doctrine of impossibility” and the “doctrine of frustration of purpose”—abstract theories of contract law that are costly to litigate and which do not always result in the excuse of performance.
Even contracts that do contain act of God clauses are at risk of litigation where the clauses are vague, generic, or otherwise poorly drafted. This is because, in construction contract disputes, it is common for the parties to disagree over what events specifically are or are not “acts of God.” Disputes of this sort often hinge upon a judge’s determination of whether the particular event in question was “reasonably foreseeable.” If the event was not reasonably foreseeable—like the rapid melting of an unusually large amount of snow causing levies to burst and unleashing unprecedented amounts of flooding—than the event will likely be deemed to be an act of God and the party’s nonperformance, at least for a time, will be excused. If the event was reasonably foreseeable—like a fifty mile per hour wind gust blowing across I-80—than the event is determined not to be an act of God and the breaching party is, therefore, not excused for their nonperformance. A properly drafted construction contract will help avoid the costs and risks associated with litigation.
A party should not try to assemble an exhaustive list of potential acts of God when drafting a construction contract. Instead, a contract should include some of the more likely events and circumstances as examples. These examples should always be coupled with a catch-all provision which seeks to include any other events or circumstances not within the reasonable control of the parties. Furthermore, the catch-all provision should specify that it is intended to cover events both similar and dissimilar to those events already listed as examples. Act of God clauses should further provide for the notification of the parties when a potential act of God event occurs and, to the extent practical, should discuss how long any nonperformance of the contract will be excused.
It should also be noted that while act of God clauses are typically invoked in circumstances of natural disasters—like Nebraska’s catastrophic flooding in 2019—careful drafting may also extend a clause’s coverage to a wide range of other unforeseen or unforeseeable circumstances, ranging from labor strikes and industry-wide material shortages to acts of terrorism.
It is best practice for parties to a construction contract to communicate early and often regarding any circumstances which might amount to an act of God-event. The parties should also communicate frequently as to what their fellow parties should expect as a project moves forward following an act of God-event.
Should you have any questions about an act of God clause in a contract or whether an event may qualify as an act of God, please feel free to contact any member of our Construction Industry Practice Group to assist you in analyzing your individual issue.