Contractual Force Majeure-based Provision

A Contractual Force Majeure-based Provision is a contractual provision that addresses the consequences of extraordinary events or circumstances beyond the control of the contract parties that prevent or hinder performance under the contract.

• AKA: Force Majeure Provision, Force Majeure Clause.
• Context:
  • It can be a risk mitigation contractual clause that excuses parties from fulfilling contractual obligations due to unforeseen and extraordinary events beyond their control.
  • It can cover various types of events, such as natural disastersnatural disasters like earthquakes or hurricanes, acts of war, terrorism, pandemics, , strikes, government actions, and other unforeseen circumstances that make performance impossible or impracticable.
  • It can (often) include:
    • a Definition of Force Majeure Events.
    • a Consequences of Force Majeure.
    • a Mitigation and Notification Requirements.
  • It can range from being an Atomic Force Majeure Provision to being a Comprehensive Force Majeure Provision.
  • It can range from being a Single Element Force Majeure Provision, a Two Element Force Majeure Provision, to being a Many Element Force Majeure Provision.
  • It can range from being a General Force Majeure Provision to being a Contract-Specific Force Majeure Provision.
  • It can range from being an Unconditional Force Majeure Provision (where the consequences apply automatically upon the occurrence of a force majeure event) to being a Conditional Force Majeure Provision (where the consequences are subject to certain conditions or limitations).
  • It can provide crucial legal relief in situations where non-performance is unavoidable, thus protecting the parties from breach of contract claims.
• Example(s):
  • a Construction Contract delayed by an unexpected hurricane, invoking the force majeure clause to extend deadlines.
  • a Supply Agreement interrupted by political unrest in a key supplier's country, activating force majeure to suspend delivery obligations.
  • A supplier unable to deliver goods because their factory was destroyed by an earthquake might invoke a force majeure clause to be excused from liability for non-performance.
  • A company unable to fulfill a service contract during a government-imposed lockdown due to a pandemic could use force majeure as a defense against breach-of-contract claims.
  • ...
• Counter-Example(s):
  • a Service Contract where an economic downturn impacts a company's profitability but does not constitute a force majeure event.
  • Routine Maintenance or predictable seasonal weather that does not meet the threshold for force majeure.
  • A Breach of Contract.
• See: Business Interruption Insurance, Legal Doctrine of Impossibility, Frustration of Contract, Acts of God.

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References

2024

• (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.

2024c

• (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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