Force majeure clause is derived from the French term meaning “superior force”, so this refers to unforeseeable circumstances that parties have little to no control over, such as earthquakes and wars, etc. These events may impact the contract and therefore these clauses help to protect one or more parties from these impacts.
If performance of the agreement becomes impossible due to force majeure, the affected party’s liability may be excused, either in part or in full, depending on the extent of the impact. However, where force majeure arises after a party has already defaulted on its obligations, that party cannot rely on it to avoid responsibility.
Common Features in Clauses
A review of various public company filings reveals several consistent themes across force majeure provisions:
- Exemption from Liability
– Most clauses relieve the affected party from liability—either partially or fully—during the period of disruption, provided the event was truly beyond their control. - Notification Requirements
– Many agreements require the impacted party to notify the counterparty within a specific time frame (e.g., 7–30 days) and, in some cases, to provide evidence such as government or notary certification. - Duty to Mitigate
– Clauses often oblige the affected party to take reasonable measures to minimize the impact of the event and to resume performance as soon as practicable. - Resumption of Performance
– Once the disruptive event ends, both parties are usually required to make good faith efforts to recommence contractual performance promptly. - Termination Rights
– If force majeure lasts beyond a defined period (e.g., 60 or 180 days), either party may have the right to terminate the agreement without liability.
