Force Majeure in Real Estate
Force majeure (French for "superior force") is a contract clause that excuses performance when extraordinary events beyond the parties' control prevent one or both from fulfilling their obligations. In real estate, force majeure clauses became highly relevant during the COVID-19 pandemic when government shutdowns prevented closings, inspections, and construction.
Common force majeure events
Natural disasters (hurricanes, earthquakes, floods), pandemics and government-mandated shutdowns, wars and civil unrest, fires, government actions (eminent domain, regulatory changes), labor strikes, and material shortages. The specific events covered depend on the contract language — force majeure is not automatic and must be specified.
How it affects real estate deals
If a force majeure event prevents closing (for example, the county recorder's office is closed due to a natural disaster), the clause may extend the closing deadline, suspend contract obligations until the event passes, or in extreme cases allow termination without penalty. Without a force majeure clause, a party who cannot close on time may be in breach of contract.
Standard contract coverage
Many standard real estate purchase contracts include basic force majeure provisions. The TREC 1-4 contract (Texas) does not have an explicit force majeure clause, relying instead on the option period and other termination provisions. Commercial contracts typically include more robust force majeure language because of longer timelines and more complex obligations.
For wholesalers
If your wholesale contract has a tight closing deadline and an unexpected event threatens to prevent closing, a force majeure clause gives you legal grounds to extend the timeline. Without one, you may need to negotiate an extension or risk losing your earnest money. Consider adding force majeure language to your standard purchase contract.