Force majeure event: Overview, definition, and example
What is a force majeure event?
A force majeure event refers to an unforeseen and uncontrollable event that prevents one or both parties from fulfilling their contractual obligations. These events are typically beyond human control and include natural disasters, wars, pandemics, government actions, or other extraordinary circumstances.
For example, if a supplier is unable to deliver goods due to a hurricane that disrupts transportation, a force majeure clause may temporarily excuse them from liability for failing to meet their obligations.
Why is a force majeure event important?
A force majeure event clause protects businesses and individuals from being held liable for failing to perform contractual duties due to extraordinary, uncontrollable events. It provides legal flexibility, allowing parties to delay or suspend obligations without facing penalties.
For businesses, force majeure clauses help manage risks in supply chain agreements, construction contracts, and service agreements. Without such a clause, a party may still be held accountable for non-performance, even if the situation was beyond their control.
Understanding force majeure events through an example
Imagine a construction company contracted to complete a building project by a set deadline. However, a severe earthquake damages the construction site, making it impossible to continue work. If the contract includes a force majeure clause, the company may be excused from meeting the deadline until the situation stabilizes.
In another scenario, an international supplier agrees to ship raw materials to a manufacturer. Due to government-imposed trade restrictions during a global crisis, the shipment is blocked. The supplier invokes the force majeure clause, temporarily releasing them from their contractual obligation.
An example of a force majeure event clause
Here’s how a force majeure clause might appear in a contract:
“Neither Party shall be liable for any delay or failure in performance due to a force majeure event, including but not limited to natural disasters, acts of war, terrorism, government restrictions, pandemics, or other unforeseen circumstances beyond their control. The affected Party shall notify the other Party as soon as possible and make reasonable efforts to resume performance once the event has concluded.”
Conclusion
A force majeure event clause provides legal protection when unforeseen circumstances prevent contract performance. It ensures fairness by temporarily excusing obligations in situations beyond the parties’ control.
By including a force majeure clause in agreements, businesses can mitigate risks, establish clear procedures for handling disruptions, and ensure flexibility in uncertain situations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.