Ganje: A contract term always poorly written |

Ganje: A contract term always poorly written

David Ganje
for Tri-State Livestock News

Man imposes his laws upon man. James Madison tells us that laws should not be overly voluminous or overly incoherent. Good luck on that score. I used to carry around the written U.S. tax code in law school for our tax class. I figured carrying around the tax code was good enough such that I did not feel compelled to take any other exercise. That was back before laptops when law codes were written on heavy papyrus rolls.

Under contract law an unplanned event is sometimes called an ‘act of God.’ An act of God or what is also called a ‘force majeure event’ is a situation beyond the control of the parties to a negotiated contract. The act of God may prevent completion of the contract. And importantly, an act of God may be grounds for cancellation of the contract. An act of God clause is the adult business version of the dog ate my homework.

How should an unplanned event be written into terms of the contract? In contract writing an event that is not a part of the contract obligation but affects the ability to complete the agreement is a so-called an act of God. Such clauses are a man-made road map showing what to do because of an unplanned event. This type of clause is a little bit like putting the genie back in the bottle after it has been out on the town partying too much. One can find act of God clauses in general sale contracts, livestock purchase agreements, wind energy agreements, right-of-way agreements, easements, oil and gas leases and general construction contracts.

Under some clauses, government intervention or government rules which stop a party from completing the contract may be grounds for a party’s non-performance of the agreement. So, this is one situation in which you can legitimately blame the government.

What are these contract-written “events” which will excuse a party from completing a contact? There are as many possible act of God events as man can devise in his mischievous little mind. An act of God event is simply whatever the agreed upon contract says it is. This is man-made law. Here is an example of an actual act of God term in a contract: “The term ‘force majeure’ shall be Acts of God, strikes, lockouts, or other industrial disturbances, acts of the public enemy, wars, blockades, riots, epidemics, lightning, earthquakes, explosions, accidents or repairs to machinery or pipes, delays of carriers, inability to obtain materials or rights of way on reasonable terms, acts of public authorities, or any other causes. . . not within the control of the [contracting party] and which by the exercise of due diligence [the contracting party] is unable to overcome.” Looking at this long contract clause, I will provide the reader with a few comments. First, it is written by someone rushing a bunch of ideas into a single clause. It is too broad and shot-gunny. The clause is not clearly understandable and needs focus. And this contract clause was written by a lawyer who has not thought about or experienced a tornado, flood or a debilitating blizzard.

No question. An act of God clause is one of several underappreciated stepsisters (that’s an East River expression) when parties and their attorneys are drafting a contract. Usually contracting parties give attention to ‘The Money’ or to the conditions of contract performance, not realizing that an act of God event can cause equal if not greater trouble for the parties in the future. How quickly money throws one off the scent. It’s the old story of greed outstripping prudence. The scope of an act of God clause depends on the type of contact, so pay attention my honorable readers. Do not avoid common sense in the early stages when negotiating and drafting any agreement. Otherwise an uninsured accident is just over the next hill. An act of God is a peril outside of man’s control, so the extent to which it can be provided for in a contract, all the better.

David Ganje of Ganje Law Offices practices in the area of natural resources, environmental and commercial law