Force Majeure and Florida Real Estate Law

Force Majeure & Florida Real Estate Law

In a perfect world, all contracts would be entered in good faith. There would be no need for laws regarding breach of contract and liability because all parties would act responsibly and live up to their word. 

Unfortunately, that is not the way the world works. Bad actors and bad faith are too common in real estate and construction. This is why contract law exists: it allows parties to enter agreements with enforceable penalties for not fulfilling the terms. This concept of liability provides all parties in a deal with reassurance that, should another party violate its terms, they have legal recourse to reclaim any losses they may suffer. 

The concept of liability can sometimes harm parties if they cannot fulfill a contract through no fault of their own. If one party is forced to breach an agreement because of the actions of another identifiable party, it is often possible to pass on liability to the entity truly responsible. But what if no one was at fault? That is where force majeure comes into play. 

Understanding Force Majeure

Force majeure clauses spent some time in the legal limelight in 2020 and 2021 after the pandemic forced many parties to invoke them at the same time. The clause generally protects one or more parties involved in a contract from liability if a significant, unforeseen event prevents them from upholding their contractual obligations. 

These clauses are intended to keep the protected party from being held liable for events like natural disasters, wars, and pandemics that they could not have predicted or prevented. Before the Covid-19 pandemic, these terms were most frequently invoked due to situations such as hurricanes, earthquakes, fires, and riots. For example, a construction company might invoke one of these clauses if it could not complete the facility’s construction on time because an earthquake heavily disrupted the region.

Force Majeure vs. Doctrine of Impossibility and Frustration of Purpose

Florida contract law has two limited alternatives to protect parties from liability in contracts. In rare cases, a court may release a party from performing a contractual obligation if the situation has changed to a significant extent. Courts rely on two primary doctrines to determine if this has occurred:

  • Doctrine of Impossibility: According to the Third District Court of Appeal in Florida, if “a contractual obligation […] is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible,” the contracted party may be released from the obligation.
  • Doctrine of Frustration of Purpose: The same court ruled that, in “cases where performance is possible but an alleged frustration, which was not foreseeable, totally or nearly totally destroyed the purpose of the agreement,” contracted parties may be released from their obligations.

It is important to note that both doctrines are defenses against accusations of breach of contract, as opposed to contractual protection. As such, there is no guarantee that a court will agree either principle applies. 

In contrast, the existence of force majeure clauses can discourage unnecessary claims and prevent or reduce costly legal proceedings. Additionally, Florida permits them to cover a broader range of situations than those where impossibility or frustration of purpose apply. In short, having a liability protection clause is significantly more effective than relying on state doctrines for protection from liability. 

Interpreting Force Majeure Clauses in Florida

Florida has developed a narrow interpretation of force majeure clauses in recent years. In ARHC NVWELFL01, LLC v. Chatsworth At Wellington Green, LLC, a case from 2018-2019, a Florida district court pointed out the general lack of precedent in the state regarding these clauses. It then instructed courts to construe every clause as narrowly as supported by the language of the process. This is intended to allow the use of these clauses to continue while ensuring as many contracts are honored as possible. 

Narrow interpretations of this concept prevent contracts from granting either party an almost unlimited opportunity to evade liability. For example, a clause that only names hurricanes, earthquakes, and fires as reasons for failing to fulfill the contract without liability would not also protect a construction company from liability if they could not complete it due to supply chain problems. Under narrow interpretations, parties are only protected from liability because of the named perils in the contract. In well-written contracts, this still offers broader protection from liability than the frustration of purpose or impossibility doctrines provide.

Enforcing Force Majeure Clauses in Florida

While a liability protection clause can be valuable protection from liability in Florida, it does not prevent someone from filing a breach of contract lawsuit. Instead, these clauses provide a defense against being held liable. It is the responsibility of contracted parties to clearly understand and prepare for potential claims. 

Since you cannot prevent affected parties from filing a claim against you, you must determine whether and how the force majeure clause in your contract protects you. For this reason, if your business experiences an event that may trigger a disaster liability protection clause in one of your contracts, it is vital to consult with an experienced attorney immediately. Your attorney will help you interpret your contract, whether the event in question meets the terms of in your contract to release you from liability, and your best path forward. 

At Isriel Ponzoli, Attorneys at Law, our skilled lawyers have years of experience interpreting Florida business, insurance, real estate, and construction law. We understand the complexities of force majeure claims and the most effective strategies for protecting our clients from liability for unanticipated losses. Learn how our firm can assist your business by scheduling your consultation today.