NEW FORCE MAJEURE AND CLOSING ADDENDUM TO PURCHASE AND SALE AGREEMENT
The Commercial Brokers Association has published a new addendum to help address issues arising from the COVID-19 pandemic. The form, entitled “FMA Force Majeure
Addendum,” is posted for use in Legal Library PRO within the Purchase & Sale Forms and is also posted in the List of Contracts. (Note: you must be logged in to the CBA website to view the form.)
It may be used in new transactions as an addendum or existing transactions
as an amendment to provide for remedies in the event either party is prevented from performing in a transaction due to a force majeure.
“Force majeure” is a French term that translates literally as “superior force.” A “force majeure event” is an event or effect that can be neither anticipated nor controlled. Many contracts contain a force majeure clause allocating risk between parties if the contract becomes impossible or impractical to perform in the event of a force majeure. Common examples of force majeure events include acts of nature, such as floods, earthquakes, hurricanes, tornadoes and the like, and acts of people, such as wars, riots or strikes and, of course, an epidemic/pandemic such as the current pandemic.
DISCUSSION
CBA’s new addendum provides for extensions of contingencies and conditions and the closing date in purchase and sale agreements for a limited amount of time should a force majeure event occur, precluding timely performance. It operates in the same way as the residential addendum recently released for the same purpose by NWMLS.
The addendum 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) are extended for an amount of time agreed to and stated in the form.
An example may help:
The parties reach mutual acceptance on March 25, and the buyer has a ten-day inspection/feasibility contingency.
On March 26, a shelter-in-place order goes into effect for two weeks (until April 9) that prevents the selling broker, buyer and inspector from inspecting the property. The parties agree in the addendum that any contingency or condition will be extended for ten days should a force majeure event occur. The original contingency would have expired on Monday, April 6, but the addendum would extend the contingency to April 16, including any related notice and response timeframes.
Obviously, dealing with force majeure events are circumstances unfamiliar to the industry. Calculating the extension of contingency time periods due to a force majeure event may be complicated. Brokers are encouraged to cooperate and work together to ensure that the parties have the same expectations with regard to timelines, and any impact a force majeure event may have.
The addendum provides that, if through no fault of the parties and by reason of a force majeure event, the sale of the property cannot be timely closed on the Closing Date, the date will be extended for an agreed upon period of time – the “Extended Closing Date.” If the sale of the property cannot be timely closed by the Extended Closing Date, the transaction terminates and the earnest money will be refunded to the buyer.
CONCLUSION
CBA recommends that all brokers working on pending transactions consider amending the transaction with this or an equivalent addendum to address force majeure events. Certainly, brokers entering into new transactions should recommend their clients consider a force majeure addendum.
If you have any questions, please call us at (425) 820-3348, send us an email, or start an online chat.
IMPORTANT COVID-19 UPDATE:
CBA STAFF WORKING REMOTELY AND ALL CLASSES CANCELED THROUGH APRIL
At the Commercial Brokers Association, we're concerned about the impact of the COVID-19 virus on our staff and our members and have been following the rapidly changing situation closely.
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Due to the local impact of the COVID-19 pandemic and our need to keep our employees and their loved ones as safe and as healthy as possible, CBA’s staff will be working remotely until at least Tuesday, April 7th, 2020. We are also canceling ALL classes through April.
CBA has the technology and phone systems infrastructure to ensure all our services, support, and applications will run smoothly during this time. Our members should not notice any difference in support or interruptions in our services.
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We will reschedule canceled classes at a later date if feasible. If you registered for a canceled class, you received a message directly from our Education Manager, Kristin Austin. Please email or call Kristin at 425-952-2739 about options to reschedule, use your credits for a future class, or obtain a refund.
If you have signed up for a class or event through one of our managed associations, please visit the association website directly for updates on their classes and events.
Certified Commercial Investment Member (CCIM) Washington State Chapter
CoreNet Global Washington State Chapter
Commercial Real Estate Women (CREW) Washington State Chapter
The Institute of Real Estate Management (IREM) Washington State Chapter
The Society of Industrial and Office REALTORS® (SIOR) Washington State Chapter
Washington State Commercial Association of REALTORS® (WSCAR)
For classes and events scheduled after April 30, 2020, please remember to check our full schedule for up-to-date information BEFORE you leave to attend.
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