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How can you negotiate force majeure clauses in a contract?

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Force majeure clauses are provisions in a contract that allow the parties to suspend or terminate their obligations in the event of unforeseeable circumstances beyond their control, such as natural disasters, war, or pandemics. These clauses are meant to protect the parties from liability and losses when performing the contract becomes impossible or impracticable. However, force majeure clauses are not standard or uniform, and they may vary depending on the type, scope, and duration of the contract, as well as the industry, jurisdiction, and negotiation power of the parties. Therefore, it is important to know how to negotiate force majeure clauses in a contract to ensure that your interests and expectations are adequately addressed and safeguarded. Here are some tips and strategies to help you with this process.

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Ehsan Alagheband

Contracts & IPR Protection Manager at Divar | MBA, Legal Falcon Awardees 2022
Lawrence Katz

Attorney at Law. Lawrence S. Katz, P.A.

1 Understand the risks

Before you enter into a contract, you should assess the potential risks and impacts of force majeure events on your performance and obligations. For example, if you are a supplier, you should consider how likely it is that your supply chain, transportation, or delivery will be disrupted by natural or human-made causes. If you are a customer, you should consider how dependent you are on the timely and quality delivery of the goods or services, and what alternatives you have in case of delay or cancellation. You should also research the relevant laws and regulations that govern force majeure clauses in your jurisdiction, and how they define and interpret the concept of force majeure. This will help you identify the scope and limitations of your rights and remedies in case of a force majeure event.

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Lawrence Katz

Attorney at Law. Lawrence S. Katz, P.A.
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I typically use the clause as an expert or counsel in drafting international travel with children orders who are to be returned on a date certain. We know that airline delays or illness can delay a timely return. Therefore I include a few additional days for the return and require notice and evidence of the cause of the delay.

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2 Define the terms

One of the key aspects of negotiating force majeure clauses is to define the terms and conditions that will trigger and govern the application of the clause. You should be clear and specific about what constitutes a force majeure event, and avoid vague or broad terms that may create ambiguity or disputes. You should also specify the effects and consequences of a force majeure event, such as whether it will suspend or terminate the contract, whether it will affect the entire contract or only part of it, and whether it will entitle the parties to claim damages or compensation. Additionally, you should establish the procedures and obligations for notifying, verifying, and resolving a force majeure event, such as how and when the parties should communicate, provide evidence, and cooperate to mitigate the impact of the event.

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3 Balance the interests

Another important aspect of negotiating force majeure clauses is to balance the interests and expectations of both parties, and avoid creating unfair or unreasonable advantages or disadvantages for either party. You should aim for a mutually beneficial and flexible agreement that allows the parties to adapt to changing circumstances and preserve their contractual relationship. For example, you may consider including clauses that allow the parties to modify, extend, or renew the contract in case of a force majeure event, or that provide for alternative modes or methods of performance or delivery. You may also consider incorporating clauses that limit or exclude the liability or responsibility of the parties for certain types of damages or losses caused by a force majeure event, or that require the parties to share or allocate the risks or costs of the event.

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Ehsan Alagheband

Contracts & IPR Protection Manager at Divar | MBA, Legal Falcon Awardees 2022
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Including a provision that requires each party to make reasonable efforts to mitigate the risks and minimize the impact of a force majeure event is a prudent and common practice in contracts with force majeure clauses. This clause encourages both parties to take proactive steps to mitigate the consequences of the event to the extent possible. This clause underscores the principle of good faith and cooperation between the parties.

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4 Review the contract

Finally, before you sign the contract, you should review the force majeure clause and the entire contract carefully and thoroughly, and make sure that you understand and agree with all the terms and conditions. You should also consult a legal professional or an expert in your industry or field to ensure that the contract is compliant with the applicable laws and regulations, and that it reflects the best practices and standards for your type of contract. You should also keep a copy of the contract and any related documents or records, and monitor the performance and execution of the contract regularly, and be prepared to act promptly and proactively in case of a force majeure event.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you negotiate force majeure clauses in a contract?

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5

1 Understand the risks

2 Define the terms

3 Balance the interests

4 Review the contract

5 Here’s what else to consider

Contract Negotiation

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How can you negotiate force majeure clauses in a contract?

1

2

3

4

5

1 Understand the risks

2 Define the terms

3 Balance the interests

4 Review the contract

5 Here’s what else to consider

Contract Negotiation

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