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Implications of force majeure in real estate contracts

On Behalf of | Jun 4, 2020 | Real Estate Law |

It is common for most contracts in Florida and around the country to contain a clause referred to as force majeure. This is a legal provision that allows parties to either defer or be released from specific obligations listed in an agreement as a result of unforeseen circumstances. Riots, labor strikes and shortages are just a few examples of the reasons force majeure could be enacted by the nonperforming party.

In times when there are no large, looming economic or health issues, force majeure can be included as common language in contracts with no real consideration or thought as to its potential impact. However, should there be an occurrence in which force majeure is enacted, it can be incredibly impactful, especially in real estate contracts. In times of natural or economic disaster, a borrower could be more likely to utilize the provisions of force majeure if their income and employment have been affected, and they are no longer able to purchase property under contract.

It is important to note that just because force majeure is included in a contract does not mean it can be automatically invoked. The usage of the clause would depend on the language in the contract. For example, if the force majeure specifically excludes a borrower’s ability to make monthly payments, and the borrower loses their job, they would not be able to use the job loss and the lack of ability to pay as a reason to be released from the contract.

Dealing with complex language, such as force majeure, in residential and commercial real estate contracts can be complex and frustrating to real estate agents, brokers and lenders. An experienced real estate contracts attorney could be useful in navigating these types of difficult legal clauses and could help to ensure the responsibilities of all parties are upheld.