In business, surprises happen. A well-drafted force majeure clause turns those surprises into a manageable pause rather than a costly dispute.
What is a force majeure clause?
A force majeure clause is a contract provision that excuses or suspends performance when events beyond a party’s control prevent fulfillment. It sets the scope of what counts as an excusable delay and often links the right to suspend to specific events listed in the agreement.
Common triggers and exclusions
Typical triggers include natural disasters, wars, government actions, epidemics, and labor strikes. Some clauses also cover supply chain disruptions and transportation barriers.
Exclusions carve out what is not excused, such as financial hardship or mere business inconvenience. Drafters should be precise to avoid disputes over ambiguous language.
Drafting tips for clarity
Define events clearly, avoid open ended terms, include notice requirements, and specify the consequences of a trigger, including suspension, pricing adjustments, or termination rights.
Include a rescue mechanism if the event ends; set a reasonable duration for suspension; and consider whether partial performance is allowed.
Impact on performance and remedies
When force majeure applies, performance may be paused for a defined period. Contracts often address payment obligations, delivery schedules, and any required mitigation efforts during the pause.
Real-World Example
In a manufacturing supply agreement, a major hurricane disrupts a key supplier’s factory. The force majeure clause excuses delayed shipments for the duration of the disruption, triggers a notice period, and allows either party to suspend obligations without liability while the plant remains nonfunctional. After 60 days, if operations cannot resume, the contract may permit termination with limited liability, subject to notice and cure provisions.
Checklist: Key questions to review
- Does the clause define events clearly and include an exhaustive or illustrative list?
- Are notice periods and methods specified?
- What are the consequences of a force majeure event, including suspension, price adjustments, or termination?
- Is there a duty to mitigate and a right to terminate if the event lasts beyond a defined period?
- Are government actions or pandemics covered?
- Is there a cure period or extension process for ongoing events?
FAQ
- What events qualify as force majeure? Most clauses list events like natural disasters, war, government actions, pandemics, and strikes. Always read the defined terms in your contract.
- Does force majeure excuse all obligations? Not necessarily. Some obligations may continue, such as payment for goods delivered or data privacy duties. The clause often specifies what is paused and what must still be performed.
- How does government action interact with force majeure? If a government bans or restricts activities, that action can be a trigger, but many clauses require the action to be beyond the party’s control and not due to existing noncompliance.
- Can force majeure be used to terminate a contract? Some clauses allow termination after a defined interruption; others require mutual agreement or a specific termination right if performance becomes impracticable.
Next steps and contact
Ready to review or draft a force majeure clause tailored to your business? Our contracts team can tailor language, assess risks, and help implement clear notice and termination steps.
Contact us today to schedule a consultation. We can help you draft a precise force majeure clause and align it with your risk tolerance and operations.
Disclaimer: The information provided here is for general informational purposes and does not constitute legal advice. For advice on your specific contract, speak with a qualified attorney in your jurisdiction.
