Last year (October 8, 2016 to be exact) our firm authored a blog about the Force Majeure Clause in Purchase and Sale Agreements (FRBAR rev. 2/16) at a time where the practical effects of a Force Majeure event was not locally present. Today, under a new contract (Florida Realtors/Florida Bar – Residential Contract for Sale and Purchase – Rev 4/17) and after Hurricane Irma, we thought it would be best to revisit the subject and applicable contractual provisions.
Section 18 (Standards), Paragraph G (Force Majeure) of the FRBAR Contract specially outlines how the Contract dates and terms may be modified by “Force Majeure”. Paragraph G provides:
- That a Buyer and Seller shall not be required to perform any obligation under the FRBAR Contract or be liable to each other for damages so long as performance or non-performance of the obligation, or the availability of services, insurance or required approvals essential to Closing, is disrupted, delayed, caused or prevented by Force Majeure.
- Force Majeure means: acts of God including, but not limited to, hurricanes, which, by exercise of reasonable diligent effort, the non-performing party is unable in whole or in part to prevent or overcome.
- All time periods, including the Closing Date, will be extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under the Contract.
- If a Force Majeure event continues to prevent performance under the Contract for more than 30 days beyond the Closing Date, then either party may terminate this Contract by delivering written notice to the other and the Deposit shall be refunded to Buyer.
Below are just a few of the issues that have evolved as a result of Hurricane Irma:
- How does a party know when Force Majeure no longer prevents performance under the contract? Is it when power has been restored to the Subject Property, when a licensed inspector can actually inspect the property, when the all parties to the transaction are in a position to proceed with closing?
- When Force Majeure occurs during the Inspection Period does it extend the Closing Date automatically even if Force Majeure no longer prevents performance under the Contract?
- If the Force Majeure initially impacted inspections but now inspections can be performed within the Inspection Period is the Inspection Period automatically extended?
- What if Force Majeure prevents the ability to perform a walk-through prior to closing? Do I still need to close or can we wait until power is restored?
- My deposit was due on the day Hurricane Irma impacted this area but I could not wire it or deliver it due to severe weather . . . how does this impact me? What if my bank could wire it but I did not want to travel to the bank during the inclement weather?
- My insurance provider suspended insurance while Hurricane Irma was inside the Hurricane Box and therefore I could not close. How does this impact me? (As a courtesy and not to be meant as a guideline please see coordinates for Hurricane Box here: http://goo.gl/maps/drebq and Tropical Storm Box here: http://goo.gl/maps/uJZ2Q to assist in determining when property insurance underwriting is usually suspended).
- Does Force Majeure apply if all contingencies of a contract have been met but my lender and insurance agent are now requiring a re-inspection of the Property before funding? What if the Property fails re-inspection?
There is no doubt that Hurricane Irma was an event covered under the Force Majeure clause. It caused major wind and water damage and power outages throughout Florida. However, depending on the facts surrounding each affected Property or Contract our answers to the issues above may differ. We have taken the position that when in doubt obtain an addendum. A properly drafted addendum should remove any lingering ambiguities or questions. As always, we suggest you contact your real estate attorney should you have any questions.
Berlin Patten Ebling, PLLC
Article Authored by Jamie A. Ebling, Esq. firstname.lastname@example.org
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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