Force Majeure in Focus: Strategies for Narrowing the Clause in Modern Contracts.

Unforeseen events are an inherent part of life, and their occurrence is particularly prevalent in commercial transactions, where they represent a significant occupational risk.

Just as life presents unexpected challenges, businesses must be prepared to deal with sudden, unpredictable events that can disrupt operations or delay performance. These contingencies—whether natural disasters, economic downturns, or supply chain disruptions—are risks that cannot always be predicted but must be managed as part of doing business.

The purpose of a force majeure clause is to allow relief in cases where performance becomes impossible due to circumstances beyond the control of either party.

In commercial dealings, this unpredictability underscores the importance of incorporating mechanisms like force majeure clauses to mitigate the impact of such events and ensure that unforeseen risks do not derail the entire transaction. Preparing for these possibilities allows businesses to adapt more effectively, minimizing the impact on their contractual obligations.

So much has been said about the #forcemajeure clause since the #pandemic - the events of Covid brought to the fore, the inadequacy of many force majeure clauses as courts globally were at the time, saddled with the responsibility of determining if Covid was sufficient defense against non-performance due to the global disruption especially since most force majeure clauses did not anticipate or include the pandemic as a trigger.

Post-Covid, many businesses have expanded their force majeure clauses to include pandemics, and supply chain interruptions.

I would presume that a significant lesson for #attorneys and #contractmanagers Post-2020 is the greater emphasis on tailored force majeure clauses that reflect the unique risks of each commercial transaction.

Customising a Force Majeure Clause:

A typical force majeure clause is expressed as this

Neither party shall be liable for any failure or delay in the performance of its obligations under this Agreement (except for payment obligations) if such failure or delay is caused by an event or circumstance beyond the reasonable control of the affected party, including but not limited to: Acts of God (such as floods, earthquakes, or other natural disasters); War, terrorist threats or acts, civil unrest; Government orders, embargoes, or quarantines; Epidemics, pandemics, public health emergencies, or outbreaks of infectious disease; Explosion, fire, or destruction of machinery, equipment, or materials.

The Attorney may decide to further exclude some events from the broader specified categories - for example, in a Contract of Supply and where Civil unrest has been specified has a Force Majeure trigger - a proviso could be included to further narrow this down e.g.

... Notwithstanding the inclusion of civil unrest as a potential force majeure event under this Agreement, the Supplier shall not be entitled to invoke civil unrest as a force majeure trigger in the following circumstances:

1. Foreseeability: Where the civil unrest was reasonably foreseeable at the time of entering into this Agreement, or where sufficient public information was available regarding the likelihood of such unrest, the Supplier may not claim force majeure on this basis.
2. Geographical Limitation: Civil unrest occurring in a location that does not directly impact the Supplier's facilities, production site, or ability to transport or deliver the goods as per this Agreement shall not constitute a force majeure event.

The specific factors that trigger force majeure can vary widely depending on the nature of the agreement - the triggers for commercial contracts in manufacturing could differ largely from that in events planning - the practical application of force majeure often requires tailoring to fit the unique circumstances of each contract.

Remember,

"Narrow" trumps vague and is often the better option.

This does not imply that the clause should be overly-specific or restrictive.

Doing the above may leave parties vulnerable to events that are genuinely #unforeseeable but not explicitly listed in the contract - again, just as it was with the Pandemic. While specificity is necessary to avoid abuse of force majeure, it’s equally important not to eliminate #protection against legitimate disruptions, #balance is key.

Ultimately,

Refining and limiting force majeure provisions allows for more precise risk allocation and a clear contract. Parties should only be excused from fulfilling their #contractual obligations, when it has become impossible to perform the contract, and - drafting a strong clause, either as a protective or defensive mechanism must be done by an attorney who appreciates its relevance and implications to the contracting parties and the #transaction as a whole.

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