Force Majeure Clauses in Purchase and Sale Agreements

First, the team at Berlin Patten Ebling, PLLC wishes and prays for the safety of all people impacted by Hurricane Matthew.  If you have spent any significant amount of time in Florida, you likely have some firsthand experience with the devastating effects of a hurricane and/or tropical storm.  Armed with a comprehensive understanding of the risks and vulnerabilities associated with these storms, parties should pay particular attention to the casualty, insurance and force majeure clauses in purchase and sale agreements.

These clauses are often-times given perfunctory treatment given the relatively low risk of such an event occurring.  However, these clauses could have a significant impact on your transaction and should not be taken lightly.  This is especially true during hurricane season!

For example, what happens if you are unable to obtain insurance just prior to your closing because a storm is approaching?  This could easily happen as Florida insurance companies are permitted to suspend the binding (which is simply the final process of securing coverage) of home insurance policies a few days prior to a storm approaching and continue to not allow securing coverage until after (even a few days after) the storm has passed.  There are no set rules on when Florida home insurance companies are permitted to suspend the ability to secure coverage and the decision is made by each company individually.

Fortunately, the FAR/BAR contract (the contract we find most of our readers use with respect to residential transactions) provides for an extension of the closing date if extreme weather or other conditions cause: (i) disruption of utilities or other services essential for closing or (ii) Hazard, Wind, Flood or Homeowners’ insurance to become unavailable prior to closing.  The default language in the FAR/BAR contract provides that the closing date could be extended up to 3 days after restoration of utilities and other services essential to Closing and availability of applicable Hazard, Wind, Flood or Homeowners’ insurance.  Either party may terminate the contract in the event that said services are not available within 14 days of the original closing date.

While the FAR/BAR contract provides some great default language in this instance, there are many contracts that completely lack these provisions in their entirety.  As such, we recommend having an experienced real estate attorney review your contract prior to execution to ensure that you are not left in the wind when it comes time for closing!

Again, the team at Berlin Patten Ebling, PLLC wishes and prays for the safety of all people impacted by Hurricane Matthew.


Berlin Patten Ebling, PLLC

Article Authored by Will McComb, Esq.

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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