Force Majeure Clause
A Force Majeure Clause is a provision typically included in contracts that frees parties from liability or obligation when an extraordinary event or circumstance beyond their control prevents one or both of the parties from fulfilling their contractual obligations. Such events may include natural disasters (like floods, earthquakes, or hurricanes), war, terrorism, epidemics, or any other unforeseen events that cannot be avoided with reasonable care.
The purpose of a Force Majeure Clause is to allocate the risk of loss when an unforeseen event occurs, thus providing protection for the affected party. For instance, if a construction company is unable to complete a project due to a hurricane, the Force Majeure Clause may excuse the company from penalties for delay, allowing them to resume work once conditions normalize without facing breach of contract claims.
It’s important to note that the specific wording and scope of a Force Majeure Clause can vary significantly. Some clauses may list specific events considered as force majeure, while others may include a catch-all provision for unforeseen circumstances. Additionally, the affected party may be required to provide notice to the other party and demonstrate that the event directly impacted their ability to perform under the contract.
« Back to Glossary Index