Force Majeure


A Force Majeure clause (French for "superior force") is a contract provision that allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible. The provision may state that the contract is temporarily suspended, or that it is terminated if the event of force majeure continues for a prescribed period of time.

The list of events to be included is a matter of negotiation between the parties. A typical list of force majeure events might include war, riots, fire, flood, hurricane, typhoon, earthquake, lightning, explosion, strikes, lockouts, slowdowns, prolonged shortage of energy supplies, and acts of state or governmental action prohibiting or impeding any party from performing its respective obligations under the contract. So if, for example, a hurricane occurred that shut down a port, the seller planning to ship its goods through that port would not be liable for late delivery of the goods.

In the absence of a force majeure clause, parties to a contract are left to the mercy of the narrow common law contract doctrines of "impracticability" and "frustration of purpose," which rarely result in excuse of performance.

As such, the following elements should be addressed in a force majeure clause:

  • Definition of force majeure events
  • What happens when an event occurs
  • Who can suspend performance; and
  • What happens if the force majeure event continues for more than a specified period of time

Standard Clause

Force Majeure. A party shall not be liable for any failure of or delay in the performance of this Agreement for the period that such failure or delay is due to causes beyond its reasonable control, including but not limited to acts of God, war, strikes or labor disputes, embargoes, government orders or any other force majeure event.

Clause Alternatives

Force Majeure. Neither party is liable for failure to perform, except with respect to payment obligations, solely caused by:

  • unavoidable casualty,
  • delays in delivery of materials,
  • embargoes,
  • government orders,
  • acts of civil or military authorities,
  • acts by common carriers, emergency conditions (including weather conditions) incompatible with safety or good quality workmanship, or
  • any similar unforeseen event that renders performance commercially implausible.

If an event of force majeure occurs, the party injured by the other’s inability to perform may elect one of the following remedies: (a) to terminate this agreement in whole or in part; or (b) to suspend the Agreement, in whole or part, for the duration of the force majeure circumstances. The party experiencing the force majeure circumstances shall cooperate with and assist the injured party in all reasonable ways to minimize the impact of force majeure on the injured party, which may include locating and arranging substitute services if necessary.

OR

Force Majeure. A Party shall not be deemed in default of this Agreement, nor shall it hold the other Party responsible for, any cessation, interruption or delay in the performance of its obligations (excluding payment obligations) due to earthquake, flood, fire, storm, natural disaster, act of God, war, terrorism, armed conflict, labor strike, lockout, boycott or other similar events beyond the reasonable control of the Party, provided that the Party relying upon this provision:

  • gives prompt written notice thereof, and
  • takes all steps reasonably necessary to mitigate the effects of the force majeure event.
  • If a force majeure event extends for a period in excess of 30 days in the aggregate, either Party may immediately terminate this Agreement upon written notice.

Discussion

Force majeure is defined generally as any event or condition, not existing as of the date of signature of the contract, not reasonably foreseeable as of such date and not reasonably within the control of either party, which prevents, in whole or in significant part, the performance by one of the parties of its contractual obligations, or which renders the performance of such obligations so difficult or costly as to make such performance commercially unreasonable.

Under most national laws, force majeure events must meet four criteria: (1) the event must be external to the contract and the parties; (2) the event must render the party’s performance radically different from what the parties originally contemplated; (3) the event must have been unforeseeable; and (4) the occurrence of the event must be beyond the control of the party seeking to use force majeure as an excuse for non-performance. Force Majeure Clauses: Buried in the Boilerplate But Important, Mary K. McCormick.

Courts tend to interpret force majeure clauses narrowly; that is, only the events listed and events similar to those listed will be covered. For example, while acts of terrorism might be a specified force majeure event, it does not necessarily follow that a court would also excuse a party’s performance based on "threats" of terrorism. Thus, it is especially important to specify any types of circumstances that you anticipate could prevent or impede your meeting from being held. Understanding Force Majeure Clauses, Janice M. Ryan.