Force Majeure contract addendum

Many real estate contracts address “acts of God” type issues by including a “force majeure clause.” A force majeure clause excuses the parties from the contract due to extraordinary circumstances outside of their control.

NWMLS Form 22FM defines a “Force Majeure Event” as “an occurrence that is beyond the control of the party affected and could not have been avoided by exercising reasonable diligence, making the means of performance objectively impossible. Force Majeure Events includes acts of God, war, riots, strikes, fire, floods, epidemics, or other similar occurrences.”

Events associated with the recent COVID-19 epidemic may qualify as such an event that may relieve or delay part of a contractual obligation.  NWMLS Form 22FM provides that, if through no fault of the parties and by reason of a force majeure event, any contingency or condition in the agreement cannot be timely completed, then all the time periods associated with that contingency or condition (and any related notices and responses thereto) will be extended for an amount of time agreed to in the form

A shelter-in-place directive could prevent timely completions of inspections, appraisals, and closings.   Calculation of extension periods maybe somewhat complicated.  All parties should cooperate to ensure that everyone has the same expectations with regard to the timelines in the agreement.  

Parties to an existing purchase and sale agreement should consider amending their agreement to add Form 22FM.  Buyers and sellers who are not yet under contract, should consider using Form 22FM with new agreements for the foreseeable future to accommodate possible complications. 

All parties are encouraged to talk with their brokers and other trusted real estate professionals to help navigate the myriad of issues that might arise during this unprecedented time.