What is Force Majeure?
Force Majeure (forss muh-ZHUR ) is a phrase meaning “superior force”, also known as cas fortuit (French) or casus fortuitus (Latin) “chance occurrence, unavoidable accident.” It is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract.
Navigating Unforeseen Challenges in Contract Fulfillment
In the realm of contracts and procurement, certain terms hold the power to significantly impact the course of business dealings. One such term is “Force Majeure.” Derived from French, it translates to “superior force,” and plays a crucial role in providing legal protection when unforeseen events disrupt contractual obligations.
Force Majeure refers to circumstances beyond the control of any party involved in a contract, which can be invoked as a legal excuse for non-fulfillment of contractual obligations. Traditionally, it was associated with “Acts of God”, natural disasters such as earthquakes, floods, and hurricanes. These were events no one could predict or prevent, making it impossible for either party to fulfill their contractual duties.
However, the scope has evolved. Today, it encompasses a broader range of unforeseen events, including government decrees, edicts, strikes, pandemics, and other extraordinary circumstances. This expansion reflects the complexity and unpredictability of the modern world, where non-natural events can equally disrupt business operations.
Force Majeure Clauses in Contracts
Including a specific clause in contracts is vital for several reasons:
Risk Mitigation:
It provides a safeguard for both buyers and suppliers against unforeseen disruptions, ensuring that neither party is unfairly penalized for circumstances beyond their control.
Clarity and Precision:
Clearly defining what constitutes Force Majeure helps avoid disputes. Both parties should agree on specific events that will trigger a Force Majeure clause at the contract stage itself.
Legal Protection:
It offers a legal framework for parties to follow in the event of an incident, outlining steps for notification, mitigation, and potential renegotiation of contract terms.
Modern Interpretations and Applications
The flexible interpretation means that it can cover a wide array of events. For instance, during the COVID-19 pandemic, many businesses invoked Force Majeure clauses due to government-imposed lockdowns, travel restrictions, and supply chain disruptions. Similarly, Force Majeure actions from political unrest, cyber-attacks, and significant industrial actions are increasingly being considered under this clause.