‘Force majeure’ protection for seismophobes and the rest of us

Ron Hay is a lawyer with the Communications Group at the Toronto law firm of McMillan Binch.

The impact of the recent Los Angeles earthquake on film and television production in L.A. highlighted the importance of disaster or ‘force majeure’ clauses for the entertainment industry.

According to a recent Globe and Mail story, damage to the soundstage of nbc’s Seinfeld will cost two weeks of lost production, and other u.s. network shows are expected to lose at least a week. Production could easily have been stopped altogether on various projects had the quake exacted greater tolls on major studio lots.

While most of Canada, other than b.c.’s Lower Mainland, is relatively safe from the threat of major earthquakes, scores of other ‘natural disasters’ and ‘unforeseen events’ could easily grind any production to a halt. Fault lines or not, force majeure clauses are an important mainstay in entertainment contracts.

Freak accidents and forces of nature can occur at any time, and industry contracts should provide for such contingency. Labor unrest provides another threat to a production. The impact of the 1988 Writers Guild of America strike on television and film production in the u.s. was considerable, and, needless to say, a strike by a lighting crew or other technical personnel would be equally devastating to a production.

The aftershock of force majeure

If you are a producer, you and the production company will be faced with immediate legal and other problems in the event production is halted due to an event of force majeure. Contractually, you are obliged to continue to pay cast and crew, most likely on a weekly basis. However, since you can’t perform, you will want relief from your obligations to continue the payroll. Without appropriate wording in the production’s agreements, you would most likely continue to be bound by the contracts even though your hands are tied.

Two solutions can offer a producer some protection against an unforeseen event – obtaining insurance and including force majeure language in the production’s agreements.

Insurance

Some force majeure events, such as fire, are commonly insured against. Other events, even if insurance were available, would require premiums beyond the realities of most production budgets. Therefore, reliance on force majeure language provides the more economic approach for most unanticipated disasters.

A promise is a promise

Our legal system allows you to contract freely with other parties, creating binding promises that can only be lifted if all parties to the contract agree. Once so bound, a court will relieve you from your contractual obligations only in the rarest of circumstances. The concept of force majeure is a safety valve which can sometimes allow you to be excused from performing a contractual obligation if such failure resulted from unforeseen and unpreventable events which are beyond anyone’s control.

Unfortunately, the term force majeure lacks precise legal definition. Canadian courts have defined force majeure as ‘a supervening, sometimes supernatural event, beyond control of either party, making performance impossible.’ The basic concept allows for an unexpected force or action beyond the production company’s control and foresight that results in a production being suspended or stopped.

A lengthy shopping list of bizarre events is typically included in force majeure clauses. Historically, parties were excused from fulfilling their performances in the case of an act of God or the Queen’s enemies, restraint of princes, riots, strike and civil war. Absent further attacks on Prince Charles on his Australian tour, the prince reference is unnecessary, but the rest remains the basis of current forms of force majeure clauses.

Force majeure language

Events of force majeure fall into the following categories:

– Events of war (declared or undeclared);

– Actions of the elements (natural catastrophes such as fire, earthquake, storm, flood, drought and hurricane);

– Health concerns and accidents (epidemic, casualty);

– Government interventions (regulations, judicial orders, rationing of labor/energy/utilities);

– Labor unrest (strike, lockout); and

– Failure of performance by key elements/individuals connected with the project.

Inevitably a catchall phrase, such as ‘or any other occurrence beyond the company’s control,’ concludes the lengthy force majeure clause. Such language is included as an attempt to prevent any court which may someday be called upon to interpret the clause from reading the clause too narrowly.

If the clause is not broadly written, the court may be extremely reluctant to provide relief to a party which is trying to justify its failure to perform a contractual obligation due to an unforeseen circumstance of force majeure.

Contract suspension

Many contracts in the entertainment industry provide that a production company may suspend all of its obligations if an event of force majeure occurs (and in fact, some guild agreements deal with the issue and should be checked carefully).

Generally, agreements state that the contract can be suspended immediately after an event of force majeure, so that risks or losses associated with any production delay lie with those suspended. While some individuals with superior bargaining power may be able to obtain a ‘grace period’ of a few weeks before a suspension kicks in, those cases will be rare.

Allocation of risk

The force majeure concept lets parties to a contract anticipate and allocate risks and losses associated with unforeseen events before they happen, while at the same time allowing for both flexibility and the all-important certainty of contract.

The element of control is key to reliance on force majeure clauses. You will not be excused for a failure to perform a contractual obligation on the basis of a self-imposed condition, nor on your own negligence or omission. Courts have also held that an event of force majeure does not exist simply because a change of circumstances means you will lose money if you continue to perform your contractual obligations.

Producer’s wishes

Faced with an event of force majeure, a production company will have two competing concerns: firstly, it needs to hold together the production losing as little momentum and personnel as possible; and secondly, since cash flow will most likely be suspended, it needs to suspend payments to those engaged. To meet these concerns, a flexible force majeure suspension period is desirable.

If production is suspended due to a force majeure event, your pay cheques will come to a halt. To soften the blow, you can try to obtain a ‘grace period’ before a suspension is implemented.

In addition, if you sign a contract in which your services may be suspended, attempt to cap any period of suspension, so that, after a limited period of time, other work opportunities can be freely accepted. If the producer refuses to limit the length of suspension to a reasonable period of time, you should request the ability to accept other short-term employment during the suspension.

You will also want the agreement to allow for only one period of suspension for each event of force majeure, in order to prevent a producer calling you back for a week before commencing a new period of suspension.

Terminating the agreement

Force majeure clauses typically allow the production company to terminate the agreement at the end of the allowable suspension period, removing further obligations to individuals involved with the project.

Individuals, too, should ask for a right to terminate the agreement, although the producer may very well counter this with a request for a right of reinstatement within a few days of receipt of an individual’s notice of termination.

Another request, the success of which may depend on bargaining strength, is the option of providing the services according to the original contract, in the event that a production recommences after such a termination.

Linking suspension with others

You may also wish the contract to stipulate that your suspension be linked to other individuals (i