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Education

default. For example, without a tornado, I would have de-
livered the garden shed you ordered. Because of the tor-
nado, I can't, because it blew away.

Force majeure clauses in contracts are included to provide
one or more parties to an agreement relief from their ob-
ligations should certain circumstances arise. The event
contributing to the application of the force majeure clause
should not only be unforeseeable, but also beyond the con-
trol of the parties.
Force majeure Unforeseeable here, means unforeseeable at the time the

contract was entered into. As in the typical clause ex-
clauses – never ample above, force majeure clauses outline the types of
situations where the clause may excuse non-performance.
read until now Since such clauses are a construct of the parties, the mean-
ing and scope shall be those given by the parties in cre-
ating the agreement. Where clauses are lacking or where
By Adam Atlas there is room for interpretation, courts will apply common
law principles.
Attorney at Law
What if the force majeure clause
adly, because of the COVID-19 pandemic, does not list pandemic?
some participants in the payments industry are
unable to meet their contractual obligations. Many drafters of force majeure clauses include catch-all
S The purpose of this article is to give some guid- phrases to extend the provision to non-enumerated situa-
ance to people on either side of that terrible turn of events. tions by including words such as "other," etc. Courts tend
to apply the ejusdem generis (Latin for "of the same kind")
Specifically, I want to discuss force majeure clauses, which theory when determining if a given situation fits within
are most likely to apply to a pandemic-caused contractual the catch all phrasing.
default. Simply put, when it comes to the law, force majeure
pertains to unforeseeable circumstances that prevent Ejusdem generis dictates that when general terms follow
someone from fulfilling a contract. an enumerated list of two or more items, then the general
terms must apply only to items of the same class as those
Force majeure clause enumerated. The potential application of ejusdem generis
to a force majeure clause must be kept in mind not only
Force majeure clauses in contracts are usually buried in when drafting such clauses, but also when formulating
the general provisions and are rarely negotiated or even argumentation to either defend or argue the non-applica-
read. The pandemic has suddenly given great importance bility of a force majeure clause.
of force majeure clauses.
When analyzing force majeure clauses, courts will often
A typical force majeure clause in a payment processing ask three questions:
agreement reads as follows:
1. Is the event in question a force majeure event (as de-
"Force Majeure. No Party shall be liable for any default fined by the clause)?
in the performance of its obligations under this
Agreement if such default or delay is caused, directly 2. Was the event beyond the reasonable control of the
or indirectly, by an Act of God, fire, flood, earthquake, party evoking the clause?
conditions or events of nature, war, terrorism, riots,
pestilence, civil disturbances, work stoppages, 3. How does the event affect the obligation the party is
equipment failures, power failures, governmental seeking to be excused from?
orders, or any other similar cause or event beyond Case Study 1: ISO can't make minimums
the reasonable control of the affected party (provided because of COVID-19
the non-performing Party is without material fault in
causing such default or delay)." Taking an extreme but illustrative example, if an ISO has
focused on selling merchant services to amusement parks,
The key legal question when facing a force majeure clause and all amusement parks are closed by order of the state,
is to determine whether it relieves the party of default for even if the force majeure clause in the ISO agreement does
non-performance. In other words, but for the force ma- not expressly mention pandemics, generic wording on fac-
jeure event, would the failure of the party place them in tors beyond the control of the ISO would likely support

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