What Is A Force Majeure Provision?
A force majeure provision excuses a party from performing its contractual obligations if certain circumstances beyond its control arise. These may include natural disasters, epidemics, pandemics, strikes or other organized labor issues, acts of war, and acts of government preventing performance. A force majeure clause is typically designed to protect the parties from liability if they are unable to perform, which creates a tension between the parties as the recipient of services and goods typically wants to receive the benefit of the bargain regardless of a force majeure event.
In general, the importance of a force majeure clause depends on the nature of the business relationship and the risks involved. For example, a force majeure clause may be particularly important in a services agreement, where the performance of the work may be disrupted by a force majeure.
Components Of Force Majeure Provisions
There is no one-size-fits-all list of components that must be included in a force majeure provision. However, there are some common elements that are often included in a force majeure provision:
Definition of Force Majeure. This may include a list of specific events or circumstances that are considered to be beyond the control of the parties and that would trigger the force majeure provision. The examples above are illustrative, but by no means limiting, as many force majeure provisions will specify specific types of force majeure events, but then also have a catch-all that ties to events that are beyond the reasonable control of the parties. For some contracts, catch-alls may impact the nature of the services that are bargained for in the first place, and exceptions can be included to address specific concerns.
Suspension or Termination of Obligations; Notice Periods. A force majeure provision may permit one or both parties to suspend or terminate their obligations under the contract if a force majeure event occurs, or may require a party to first use a designated level of efforts to try to regain contractual compliance prior to invoking any suspension or termination rights. This may also be tied to specific time periods, as many recipients of services or goods do want performance to be completed, and only want exit rights if the force majeure event will be in effect for an extended period of time. These rights are typically tied to notice provisions, and to provisions that govern the duration of the force majeure event that would trigger the rights of a party to terminate or suspend its performance, in whole or in part.
Are Force Majeure Provisions Common?
It is not uncommon for contracts to include a force majeure provision, particularly in industries or situations where the performance of the contract may be disrupted by unforeseen events. However, not all contracts include a force majeure provision. The force majeure provision must be seen as part of the greater negotiation of the agreement’s risk allocation. In some cases, a party with little leverage may push only items they deem critical to getting a transaction closed. In other situations, parties have affirmative requirements for disaster recovery and business continuity that require them to be ready for certain force majeure events, especially with respect to mission-critical goods and services.
If A Contract Lacks A Force Majeure Provision, Can A Party Still Declare A Force Majeure?
If an agreement does not include a force majeure provision, the parties may still be able to claim a force majeure under applicable law. The specific rules and requirements will vary by jurisdiction. It is important to note that a force majeure is not an automatic excuse for non-performance. It is always a good idea for parties to consult with legal counsel to determine whether force majeure may apply in a given situation.
Conclusion
Force majeure provisions can protect one or more parties to an agreement in certain situations, and may be negotiated by the parties to address the particular nuances of their deal and anticipated issues that may arise.
Shared by Geoffrey G. Gussis, Esq., a business lawyer and technology lawyer licensed in New Jersey and New York. Learn more about me, the legal services I provide, and articles I have written. Contact: geoff@gussislaw.com or (732) 898-0549 or (646) 389-2946 for a free consultation.
The materials available at or through this website are for informational purposes only and do not constitute legal advice. You should contact a licensed attorney in your jurisdiction to obtain advice with respect to any particular issue or problem. Use of and access to this website, or any of the information or links contained within the website, does not create an attorney-client relationship.