Call Our Firm:   605.385.0330

Commercial Transactions & Litigation, Environmental Law, Natural Resources Law, & Energy Law

Are acts of God acts of man?

Posted on: September 2nd, 2018
by David Ganje

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 go to the gym for exercise. That was before computers when law codes were written on heavy papyrus rolls.

Man by law has made a law of ‘an act of God.’ An act of God or what is also called a ‘force majeure event’ is an event beyond the control of parties to a contract which 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. Wouldn’t an act of God be a good defense in criminal court? Boy, I sure could have used it for myself in juvenile court.

How a contract party is to deal with a surprise event is written into the agreed upon 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 the so-called an act of God clause. These clauses also go by the fancy name of a ‘force majeure clause.’ 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 finds these clauses in wind energy agreements, right-of-way agreements, easements, oil and gas leases and general construction contracts.

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

What are these magical “events” which will excuse a party from completing a contact? There are as many possible 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 agreement: “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 clause, I will provide the reader with a few comments. First, it is written by someone rushing a bunch of ideas into a clause. It’s a little too shot-gunny. It is overbroad and needs focus. And it was written by a lawyer who has not 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 draft and negotiate an agreement. Usually in a transaction parties give energetic 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. 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 specific terms of the agreement, so pay attention my honorable readers. Do not avoid focused 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.