“Force Majeure” is a French term and literally means superior force. Haverhill Glen v. Eric Petroleum Corp., 2016-Ohio-8030, 67.N.E.3d 845 ¶ 25 (7th Dist.). It is commonly defined as an event or effect that can be neither anticipated nor controlled. Black’s Law Dictionary 673-674 (8th Ed. 2004). Moreover, force majeure clauses are typically included in oil and gas leases to preserve the lease when conditions beyond the control of the parties prevent the lease from operating or producing. John S. Lowe, Oil and Gas Law in a Nutshell, at 255 (5th ed. 2009).
While they vary in breadth, most force majeure clauses in oil and gas leases specifically address conditions like the inability to procure equipment or materials, natural disasters, and laws and regulations which prevent the lessee from complying with the terms of the lease. Some force majeure clauses will even cover any cause that is not reasonably within the lessee’s control. Within the context of force majeure clauses, COVID-19 poses a new and interesting question. Could the COVID-19 pandemic trigger the application of the force majeure clause in an oil and gas lease? The answer is unclear, as we have not experienced a pandemic of this magnitude in the era of modern oil and gas leases. Moreover, Ohio case law on the application of force majeure clauses is sparse. Nonetheless, the from the several Ohio cases that address the application of force majeure clauses, we can glean insight into how such clauses are analyzed by the courts.
Non-Performing Party Bears Burden of Proof
In Ohio, the non-performing party (lessee) bears the burden of proving that the event was beyond the its control. Stand Energy Corp. v. Cinergy Serv., Inc., 144 Ohio App.3d 410, 416, 760 N.E.2d 453 (1st Dist. 2001). The lessee must also show that the event was not the result of the lessee’s fault or negligence. Id. However, “[m]istaken assumptions about future events or worsening economic conditions . . . do not qualify as a force majeure.” Id.
Sticking to the Terms of the Lease
Oil and gas leases are contracts, and the rights and remedies of the parties are determined by the terms of the written lease. Haverhill at ¶ 24. Therefore, courts will strictly construe the language of force majeure clauses, and limit their application to the events specified therein. However, this is not to say that courts will not give effect to a broad force majeure clause. Thus force majeure clauses with an extensive list of qualifying events afford the lessee a better opportunity to invoke the clause.
The ideal scenario for a lessee to invoke the force majeure clause would be if the clause specifically included a pandemic as a qualifying event. However, most force majeure clauses in oil and gas leases do not specifically account for this. To the contrary, many force majeure clauses account for conditions such as the inability to procure equipment or materials or the passing of new laws and regulations which prevent the lessee from complying with the lease terms. Considering COVID-19’s potential for significant impact on supply chains and widespread quarantine mandates, the latter set of aforementioned conditions seems to provide more opportunity for a lessee to invoke a force majeure clause.