Excused performance: Overview, definition, and example
What is excused performance?
Excused performance refers to a legal concept in which a party is temporarily or permanently relieved from fulfilling certain obligations under a contract due to unforeseen events or circumstances beyond their control. In situations where excused performance applies, the affected party is not held liable for failing to perform their duties as outlined in the contract. This typically happens when an event or condition occurs that makes it impossible, impractical, or extremely difficult for the party to meet their contractual obligations.
Excused performance is often associated with "force majeure" clauses in contracts, which outline specific circumstances under which performance may be excused, such as natural disasters, acts of war, or other events that prevent the party from fulfilling their responsibilities.
Why is excused performance important?
Excused performance is important because it helps protect parties from being penalized or held liable for failing to perform under a contract when they are unable to do so due to circumstances beyond their control. It provides a degree of fairness by recognizing that certain events—such as pandemics, natural disasters, or government interventions—can disrupt the normal course of business and make it impossible to carry out obligations.
For businesses and individuals, understanding when excused performance applies ensures that they are not unfairly burdened by external factors, while also providing clarity on the potential consequences of such disruptions. It can also reduce the risk of litigation by providing a clear framework for how certain situations should be handled.
Understanding excused performance through an example
Imagine a construction company that has entered into a contract to build an office building by a specific deadline. A major earthquake occurs, damaging the construction site and making it impossible for the company to continue work for several months. Because the earthquake was an unforeseeable event, the construction company may be excused from meeting the deadline due to the force majeure clause in the contract, which excuses performance for events beyond their control.
In another example, a supplier agrees to deliver raw materials to a manufacturer by a specific date. However, due to a severe snowstorm that disrupts transportation and causes delays, the supplier cannot deliver the materials on time. If the supplier’s contract includes an excused performance provision for events like weather-related delays, they may not be held responsible for the late delivery.
An example of an excused performance clause
Here’s how an excused performance clause might appear in a contract:
“Neither Party shall be liable for failure to perform its obligations under this Agreement if such failure is caused by an event beyond its reasonable control, including, but not limited to, natural disasters, acts of war, government actions, labor strikes, or other unforeseen circumstances. In the event of such an occurrence, the affected Party shall be excused from performance for the duration of the disruption.”
Conclusion
Excused performance is a crucial legal concept that helps ensure fairness in contract performance by relieving parties from obligations they cannot fulfill due to unforeseen or uncontrollable events. By including provisions for excused performance in contracts, such as force majeure clauses, parties can protect themselves from liability for non-performance caused by circumstances outside their control. Understanding this concept is essential for businesses and individuals to manage risks and avoid disputes when unexpected events disrupt normal operations.
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.