How to Negotiate a Force Majeure Clause in Your Contract
Why Force Majeure Negotiation Matters
Force majeure clauses define what happens when extraordinary events beyond the parties' control prevent contract performance. After the COVID-19 pandemic, supply chain disruptions, and extreme weather events, these clauses have moved from boilerplate afterthoughts to critical negotiation points.
Defining Covered Events
The most important negotiation point is which events qualify. Common approaches:
- Specific list: Enumerates events like earthquakes, floods, war, terrorism, pandemics, government actions, and labor strikes
- General catch-all: Includes broad language like "any event beyond the reasonable control of the affected party"
- Hybrid approach (recommended): A specific list with a catch-all, giving both certainty and flexibility
Events to Consider Including
- Natural disasters (earthquakes, hurricanes, floods, wildfires)
- Pandemics and epidemics
- Government actions (sanctions, embargoes, regulatory changes)
- Cyberattacks and infrastructure failures
- Supply chain disruptions
- Labor disputes and strikes
- Utility failures (power, internet, telecommunications)
What Relief the Clause Should Provide
- Suspension vs. termination: Does the clause pause obligations or allow either party to exit? Consider a tiered approach — suspension first, with termination available after a defined period
- Payment obligations: Are payment obligations suspended too, or only performance obligations?
- Mitigation duty: The affected party should be required to use reasonable efforts to mitigate the impact
- Notice requirements: Specify how quickly the affected party must notify the other and what documentation is needed
Key Negotiation Points
- Foreseeability standard: Should the event need to be unforeseeable, or just beyond the parties' control?
- Duration limits: If force majeure extends beyond a set period (e.g., 90-180 days), either party should have the right to terminate
- Partial performance: If only part of performance is affected, the unaffected portions should continue
- Financial hardship: Economic downturns and price increases are typically not force majeure — resist attempts to include them if you are the buyer
When to Consult a Lawyer
Force majeure clauses should be tailored to the specific risks of your transaction and industry. Consider having an attorney draft or review the clause to ensure it provides meaningful protection.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.