Definition: A force majeure clause in a real estate contract refers to an unforeseen event or circumstance beyond the control of the parties involved, which prevents one or both from fulfilling their contractual obligations. These events typically include natural disasters, war, terrorism, pandemics, government actions, or other extreme situations that make performance impossible or impractical.
Explanation: In real estate transactions, a force majeure clause protects both buyers and sellers when unexpected events disrupt the process. This provision allows for contract extensions, modifications, or even cancellations without penalties in situations where proceeding with the transaction becomes impossible. Lenders, title companies, and other parties involved in the home-buying process may also invoke force majeure in times of widespread economic or operational disruptions. However, not all real estate contracts automatically include this clause, so buyers and sellers should review their agreements carefully.
Example: Suppose a hurricane strikes a city where a home purchase is in progress, making it impossible for inspectors, appraisers, or title companies to complete their required steps before the contract deadline. If a force majeure clause is included in the contract, the closing may be extended until normal operations resume. Similarly, during the COVID-19 pandemic, many real estate transactions were delayed due to government restrictions, leading to the activation of force majeure clauses that allowed parties additional time to fulfill their obligations.