Force Majeure Clauses
Force majeure clauses provide an opportunity for contracting parties to either terminate a contract or suspend its performance when an unexpected event takes place which prevents the contract from being performed.
The modern trend for these clauses relieves parties from performance for "any event outside the reasonable control of the parties".
It's difficult at the best of times to persuade a court that a force majeure event has taken place.
The relevant event (which is outside reasonable control), must be an event outside the control of both parties, rather than just the party that must perform the obligation. That doesn't include financial consequences (the contract becomes more expensive to perform, or less profitable) caused by a change of circumstance.
Which doesn't make sense for most contracts.
If you're a party that can't perform an obligation under a contract, you're not as concerned if the event prevents the other party from performing the obligation. It's your ability to perform the contract that you are primarily concerned about.
There's also the matter of the list of force majeure events in the clause. When there's no list of events, one cannot point with certainty to an instance of an event that qualifies, other than in a clear case.
You could call an "Act of God clause" is part of a force majeure clause: it specifies the force majeure events.
Example: Force Majeure Clause
- Neither party shall be liable for any failure to perform or delay in performance of any of its obligations under this Agreement caused by circumstances beyond the reasonable control of that party, including but not limited to adverse weather conditions, natural disasters, fires, floods, explosions, earthquakes, nuclear disasters, insurrection, riots, acts of terrorism, war, and acts of Government (a “Force Majeure Event”).
- In the event of a Force Majeure Event, the affected party's performance under this Agreement shall be suspended for the period that the Force Majeure Event continues and the party will have a reasonable extension of time for performance of its obligations in the circumstances.
- If the Force Majeure Event continues for more than [number] consecutive days, the unaffected party may terminate this Agreement with immediate effect.
By the way. See the space for the "[number]" above?
A trick we often see is to make this period so long - typically by the customer - say 30 days.
It usually will never be satisfied. Even in situations where it would be genuinely needed, and justified.
Suppose the contract was for delivery of organs for heart transplants to hospitals.
The sort of urgency which would be required for those sorts of deliveries could be cast a contract for deliveries of iron ore from a mine over the course of a 20 year contract.
There's no comparison. 30 days would more than likely be completely inappropriate for a contract for the delivery of human organs, but reasonable for a long term mining contract where delays of all sorts could be expected, including industrial disputes, vehicle breakdowns, road blockages and flooding.
The parties may be left to rely upon the relief provided by the law of frustration.
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