Force Majeure Clause

A Force Majeure Clause is a risk mitigation contractual clause that excuses parties from fulfilling contractual obligations due to unforeseen and extraordinary events beyond their control.

• Context:
  • It can (typically) include events such as natural disasters, wars, strikes, or governmental actions.
  • It can (often) specify the procedures parties must follow to invoke the clause.
  • It can help manage risks associated with unpredictable external factors.
  • It can range from being a Broad Force Majeure Clause (covering a wide range of events) to a Narrow Force Majeure Clause (limited to specific events).
  • It can outline the duration of relief from obligations during the force majeure event.
  • It can require the affected party to mitigate the effects of the force majeure event as much as possible.
  • It can mandate prompt notification of the occurrence of a force majeure event to the other party.
  • It can specify the consequences of prolonged force majeure events, including termination rights.
  • It can be included in various types of contracts, including commercial agreements, service contracts, and construction contracts.
  • It can be governed by applicable laws and regulations that may influence its enforceability.
  • ...
• Example(s):
  • A Construction Contract Force Majeure Clause, such as:
    • “Neither party shall be liable for any failure to perform its obligations under this contract if such failure results from acts of God, war, riot, civil commotion, strikes, lock-outs, or other industrial action, fire, flood, or any natural disaster.”
  • A Supply Agreement Force Majeure Clause, such as:
    • “If the performance of this Agreement or any obligation under it is prevented, restricted, or interfered with by reason of a Force Majeure Event, the party so affected shall, upon giving prompt notice to the other party, be excused from such performance to the extent of such prevention, restriction, or interference.”
  • A Service Contract Force Majeure Clause, such as:
    • “The Service Provider shall not be responsible for delays or failures in performance resulting from acts beyond its control, including but not limited to natural disasters, acts of terrorism, or changes in government regulations.”
• Counter-Example(s):
  • A General Liability Clause, which outlines overall legal liabilities without specifying extraordinary events.
  • An Arbitration Clause, which focuses on resolving disputes through arbitration rather than on providing relief from obligations.
  • An Indemnity Clause, which addresses financial responsibilities rather than excusing performance due to unforeseen events.
• See: Contractual Force Majeure-based Provision, Contract Law, Risk Management, Business Continuity Planning, Legal Force Majeure, Natural Disaster Clause, Breach-of-Contract.

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References

2024c

• (ChatGPT-OpenAI, 2024) ⇒ Prompt: Summarize the concept Force Majeure in 1- 2 paragraphs. ChatGPT (model:gpt-4o). Retrieved: 2024-08-10.
  • QUOTE: Force Majeure, a term derived from French meaning "superior force," refers to a contractual clause that frees parties from liability or obligation when an extraordinary event or circumstance beyond their control prevents them from fulfilling their contractual duties. Common events that might trigger a force majeure clause include natural disasters (like earthquakes, floods, hurricanes), wars, strikes, epidemics, or government actions. This clause is meant to protect parties from the unforeseen and unavoidable, essentially acknowledging that certain extreme disruptions can render the performance of contractual duties impractical, impossible, or inadvisable.

    In practice, a force majeure clause typically specifies the types of events considered to be force majeure and outlines the procedure for invoking the clause, such as providing timely notice. The key principles revolve around causation, where the event must directly impede the performance of contractual obligations, and unpredictability, where the event could not have been reasonably foreseen or mitigated. By including a force majeure clause, contractual parties aim to allocate risk and define the boundaries of liability and responsibility in exceptional circumstances.

2024b

• (Cornell Law School, 2024) ⇒ https://www.law.cornell.edu/wex/force_majeure Retrieved: 2024-08-10.
  • QUOTE: Force majeure is a provision in a contract that frees both parties from obligation if an extraordinary event directly prevents one or both parties from performing. A non-performing party may use a force majeure clause as an excuse for non-performance for circumstances beyond the party's control and not due to any fault or negligence by the non-performing party. However, mere impracticality or unanticipated difficulty is not enough to excuse performance. Indeed, courts generally do not recognize an economic downturn as a force majeure event. This is because economic hardships occur regularly in business and, as a result, may be appropriately and preemptively dealt with by allocating its risk through the terms of the contract. As such, force majeure events are often labeled as "acts of god" and include both natural and man-made events like fires, floods, storms, war, and labor disputes.

2024a

• (Hargrave et al., 2024) ⇒ Marshall Hargrave, Khadija Khartit, and Suzanne Kvilhaug (2024). ["What Is a Force Majeure Contract Clause?"].In: Investopedia - Business, Business Jargon.
  • QUOTE: Force majeure is a clause included in contracts to remove liability for unforeseeable and unavoidable catastrophes interrupting the expected timeline and preventing participants from fulfilling obligations. These clauses generally cover natural disasters like hurricanes, tornadoes, and earthquakes, and human actions, such as armed conflict and human-made diseases.

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