Force Majeure is a French phrase meaning “greater force.” It is also a legal phrase used in many contracts.
The “Force Majeure clause” is typically used in contracts that require the contracting parties to act over a period of time. The clause generally says that the contracting parties are freed of the contracts obligations if an extraordinary and unforeseeable event occurs that prevents them from fulfilling their contractual duties. Typical “extraordinary and unforeseeable” events that are called out in these clauses are riots, war, severe climatic event such as an earthquake, volcano etc.
I’ve been in business for more than a quarter of a century (doesn’t that sound like a long time?) and have been party to hundreds of business contracts that have had a Force Majeure clause. I can’t remember one time that a Force Majeure event has been claimed in any of those contracts. I’m not suggesting that Force Majeure never comes into play, it certainly does. What I’m suggesting is that it’s a rare event when it does get invoked.
Donald Trump is building the Trump International Hotel and Tower in Chicago, which is to be the second-tallest building in that city (after the Sears Tower). The NY Times chronicles Trumps problems with the project as the real estate market has become recently challenged (you may have read about that.)
Trump has a personal guarantee of $40 million on his project and he’s not happy about having to pony up on that guarantee. In an attempt to save himself $40 million and perhaps to save his project, Trump is suing his lender Deutsche Bank. His suit claims that the current economic conditions allow him to invoke the Force Majeure clause of his contract. Trump’s reasoning?
"Would you consider the biggest depression we have had in this country since 1929 to be such an event? I would," he said in an interview. "A depression is not within the control of the borrower."
Oh man, where do I go from here?
I could go down the path of the automobile industry executives claiming Force Majeure has caused them to be in their current financial distress. That Force Majeure has them standing in Washington with their hands out. That Force Majeure is why they think we should agree with Nancy Pelosi that “bankruptcy is not an option!” Yeah, I could go there….
I could go down the path that Hank Paulson appears to agree with Trump that the economic situation is a Force Majeure. Why else would Paulson have asked for extraordinary and unforeseeable powers except to address a situation that was extraordinary and unforeseeable? Of course what Paulson doesn’t seem to understand is that his extraordinary and unforeseeable measures are likely to have as extraordinary and unforeseeable circumstances. Do you get the feeling at all that Paulson is just running to one side of a teeter-totter only to find that the other side just shot into the air? He corrects this by running to the other side of the teeter-totter and the side he used to be standing on shoots into the air. Yeah, I could go there…
I could go down the path that Nancy, Harry, Barry and the rest of the Dems also agree with “The Don.” It’s really the only explanation for why they would want to throw another $700 billion of claimed “stimulus” into the economy when their first pass at it did bupkus. Yeah, I could go there…
No, I don’t think any of those are the directions to go with this. Not because they aren’t real but because they are all symptoms of the real issue. “The Don” has hit upon a nugget of truth in his lawsuit.
Watching the “Bail out-o-mania” and the “I’m voting for Barack because he’ll pay my gas bill and my mortgage,” it strikes me that a significant portion of Americans believe that their entire lives have become subject to Force Majeure:
- I can’t pay my mortgage – It wasn’t possible to forsee that I wasn’t really qualified to pay this loan
- Abortion under any circumstances – It wasn’t possible to foresee the consequence of last night’s actions
- Trophies for all – It wasn’t possible to forsee a winner and a loser as an outcome of the contest.
Force Majeure is commonly referred to as “Acts of God.” Isn’t it ironic that so many people who don’t act as if they want God in their daily lives are now claiming “Acts of God” as the reason they are having the problems that they have?
