Exception to obligations: Overview, definition, and example
What is an exception to obligations?
An exception to obligations refers to a specific situation or condition in a contract or agreement that allows one or more parties to be excused from fulfilling certain responsibilities or requirements. These exceptions are often outlined in the terms of the agreement and provide circumstances under which the usual obligations do not apply. Exceptions to obligations can include things like force majeure events (e.g., natural disasters or other unforeseen events), delays caused by third parties, or conditions that prevent performance despite the best efforts of the parties involved.
In simpler terms, an exception to obligations is when the usual rules or requirements of a contract don’t apply under certain situations, and one party is excused from fulfilling their duties.
Why is an exception to obligations important?
Exceptions to obligations are important because they provide flexibility in cases where it is impossible, unreasonable, or impractical for one party to meet their contractual duties. These exceptions help prevent unfair penalties or legal issues if something beyond the party's control happens. They are especially useful in situations where external factors, like natural disasters or global pandemics, could disrupt business operations or make it impossible for a party to deliver on time or as agreed.
For SMB owners, including exceptions to obligations in contracts is crucial for protecting their business from unexpected disruptions and ensuring that the contract remains fair, even when unforeseen circumstances arise.
Understanding exception to obligations through an example
Let’s say your company agrees to deliver goods to a client by a certain date. However, a severe snowstorm disrupts transportation and delays delivery. If your contract includes an exception to obligations for "force majeure" events like this, you can be excused from meeting the original delivery deadline. The exception allows your company to delay delivery without penalty, as the snowstorm was an unexpected and uncontrollable event.
In this case, the exception to obligations protects your business from being penalized for something outside your control.
Example of an exception to obligations clause
Here’s an example of what an exception to obligations clause might look like in a contract:
“Neither Party shall be liable for failure to perform any of its obligations under this Agreement if such failure is caused by an event of force majeure, including but not limited to natural disasters, acts of government, or other circumstances beyond the control of the Party, provided that the affected Party notifies the other Party promptly and takes reasonable steps to mitigate the impact of such event.”
Conclusion
An exception to obligations helps ensure that a business or party is not unfairly penalized when they are unable to meet their contractual obligations due to unforeseen circumstances. For SMB owners, having exceptions to obligations in contracts provides protection against events that are out of their control and ensures that agreements remain fair and reasonable, even when things don’t go as planned. By including these clauses, businesses can protect their interests and reduce the risk of legal disputes.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.