Force Majeure Clause - Explained
What is a Force Majeure Clause?
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What is a Force Majeure Clause?
A clause in a contract that eliminates the duties or obligations of the parties. The clause is enforced when unavoidable, natural calamities affect the ability of the parties to meet their obligations under the agreement.
Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY
How is a Force Majeure Clause Used?
Force majeure has been taken from French language, meaning "greater force." It is connected with the idea that natural occurrences are an act of God. More specifically, it involves situations for which no one can be considered accountable, like hurricanes or a tornados. Force majeure entails human actions also, however, like armed conflict. The force majeure events have two primary characteristics:
- Unforeseeable, and
The International Chamber of Commerce defines force majeure using the word "impracticability," meaning that it is if not essentially impossible irrationally burdensome and costly to execute the contract terms. Impracticability is less than impossibility, but still unduly difficult. he event bringing this situation should be external to both parties, unexpected, and unavoidable. It is very hard to prove such conditions.
In any jurisdiction, contracts employ specific definitions making force majeure applicable to local threats. For instance, if the avalanche ruins a supplier's plant in the French Alps, it causes shipment delays and results in the client suing for the damages. The supplier can use a force majeure defense, mentioning that avalanche was an unexpected, unavoidable, and external event. In general, force majeure is in tension with the concept of "pacta sunt servanda" (agreements must be kept), a key concept in civil and international law (with analogs in common law).
It is not supposed to be easy to escape contractual liability, and proving that events were unforeseeable, for example, is difficult by design. With time, the world is getting more familiar with natural threats like asteroids, solar flares, super-volcanoes, as well as modern ones like cyber, biological warfare, and nuclear capabilities. This leads to a debate for what is and is not "predictable" in a legal sense. For example, there are questions as to whether construction and drilling projects (such as fracking) that lead to natural disasters are subject to force major. In short, the understanding force majeure is every changing.
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