Reviewed by Sep 28, 2020| Updated on
Force Majeure refers to an extraordinary event or circumstance, which is out of the ordinary control of human beings. A clause on ‘Force Majeure’ is usually a part of business contracts to provide for uncertain events disrupting the execution of a contract. The clause relieves the liabilities of the parties to a contract in the event of an unforeseen event.
Understanding Force Majeure
A clause on ‘Force Majeure’ in business contracts removes the obligations to perform under the contract of either or both contracting parties. Unforeseen events generally consist of pandemics, super-volcano, and nuclear warfare, among others. The events are not foreseeable to the parties entering into the contract. The parties may agree to an inclusive list of events which are not in control of the parties.
‘Force Majeure’ is a French term which means “greater force”. The main criteria for invoking ‘Force Majeure’ are: 1. The event must be unforeseeable and beyond the control of the parties 2. The event may lead to an impossibility of performance of obligations under the contract 3. The affected party takes all the necessary steps to mitigate the effect of the event
The clause ‘Force Majeure’ provides relief to the parties from the performance of their obligations under the contract. In the event of the occurrence of an unforeseen event, either party can give notice to the other informing about the event. They should also express their inability to perform their obligations under the contract and state that they are invoking the clause ‘Force Majeure’.
Parties should seek legal advice while invoking the clause ‘Force Majeure’ and ascertain the impact on their business. The parties cannot sue each other or claim damages for non-performance of the contract. In a case where the unforeseen event continues for an extended period, the parties may renegotiate the terms of the contract or may terminate the contract.
The clause ‘Force Majeure’ brings a situation that makes it difficult to carry out the obligations and provisions of a business agreement or contract. In many jurisdictions, the clause refers to a list of events based on the local issues or threats faced therein. The application of the concept may then be limited. However, in international contracts, the clause may cover all unforeseeable external events.
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