Introduction

Imagine this: You’ve just signed a huge business deal, and everything’s going great. Then, out of nowhere, a hurricane hits, a volcano erupts, or an alien invasion begins (okay, maybe not that one…yet). Suddenly, you can’t fulfil your end of the bargain. What happens now? Enter the force majeure clause—the unsung hero of contract law that could save your bacon when things go wildly out of your control.

Read: Why you should always have a contract when doing business

What is a force majeure clause?

Let’s cover the basics: A force majeure clause (fancy French for “superior force”) is a part of a contract that lets both parties off the hook when something extraordinary and beyond their control stops them from keeping their end of the bargain. Think of it as a “get-out-of-jail-free” card for unexpected disasters.

Typical examples? Natural disasters like earthquakes, floods, and hurricanes; war; terrorism; pandemics (looking at you, COVID-19); and other “Acts of God” that make it impossible or wildly impractical to fulfil the contract. If you're thinking, “Wow, that sounds like a big deal,” you’re absolutely right.

Read: Act of god: Overview, definition and example

Why bother with a force majeure clause?

Now, you might be wondering, “Do I really need this clause in my contracts?” The answer is a resounding yes. Here’s why:

1. Protects you from the unexpected: Life loves surprises. A force majeure clause is your safety net for when Mother Nature goes rogue or some unexpected event flips your plans upside down. Without it, you could end up liable for breach of contract, even when delivering on your promise is flat-out impossible.

2. Reduces legal risks: A well-drafted force majeure clause can significantly reduce your legal risk. It makes it clear when and how the clause applies, minimizing disputes over what counts as a force majeure event. This way, you avoid spending months in a courtroom arguing over whether a severe blizzard counts as “unexpected” in Canada.

3. Maintains business relationships: It’s not just about avoiding lawsuits. A force majeure clause helps maintain good relationships with your clients and partners. When things go wrong (and sometimes they do), this clause provides a fair and agreed-upon way to handle disruptions, keeping everyone on good terms.

Key elements of a force majeure clause

A force majeure clause isn’t a one-size-fits-all. To make it work for your specific contract and business, you need to be precise. Here are some things to include:

• Specific events: Don’t just say “all acts of God” and call it done. Be specific about which events are covered—like natural disasters, war, strikes, pandemics, or government actions. The more details you provide, the less room there is for “creative” reinterpretation later.

• Impact on obligations: Make it clear how these events will affect what each party is supposed to do. Are responsibilities paused, postponed, or fully canceled? A vague clause can lead to more confusion at a time when clarity is needed most.

• Notification requirements: Outline how and when each party must notify the other about a force majeure event. Typically, this means giving prompt written notice as soon as the event happens.

• Mitigation duties: Even during a force majeure event, the affected party usually has to try to minimize the damage. If a flood shuts down your factory, for example, you might need to explore alternative sources rather than just giving up.

Read: 7 common contract mistakes that could cost your business thousands

Real-world examples where force majeure matters

Force majeure clauses have made headlines recently—thanks in no small part to a little thing called a pandemic. Here are some real-world examples of why these clauses matter:

• Event cancellations: Remember all those events canceled in 2020? The force majeure clause was the MVP. Many companies used it to get out of obligations when their events couldn’t go on due to government lockdowns or safety concerns.

• Supply chain disruptions: When the Suez Canal was blocked by a certain cargo ship (you know the one), a lot of businesses were scrambling. Those with force majeure clauses in their supply contracts had a way to defer or cancel obligations that were impossible to meet due to the blockage.

• Construction delays: Natural disasters can halt construction projects for weeks or months. A well-written force majeure clause can allow for delays without penalties, saving both contractors and developers from unnecessary disputes.

How to use a force majeure clause in your business contracts

Here’s how to make sure your force majeure clause does its job:

1. Be specific and thorough: List all potential events that could disrupt your obligations. If you’re in a hurricane-prone area, include hurricanes. If you’re importing goods, consider strikes or port closures.

2. Tailor to your industry: Different industries face different risks. A tech company’s clause will look different from a construction company’s. Make sure yours addresses the specific threats your business could face.

3. Review regularly: Keep your clause up to date. What seemed like a remote risk five years ago—like a pandemic—might be much more relevant now.

4. Consult legal expertise: As always, if in doubt, get a lawyer. Crafting a solid force majeure clause isn’t just about throwing in a few scary words. It requires a clear understanding of both your business risks and the law.

Read: When should I hire a lawyer for my contract?

Conclusion

A force majeure clause is not just legal mumbo-jumbo—it’s a powerful tool to protect your business from the unexpected. Whether it’s a natural disaster, government lockdown, or, heaven forbid, an alien invasion, this clause ensures you’re not left holding the bag when things go wrong beyond your control.

So, next time you’re drafting or signing a contract, don’t gloss over the force majeure clause. Think of it as your legal umbrella—sure, you hope you won’t need it, but when the storm hits, you’ll be glad it’s there. And when in doubt, remember: always be prepared for the unexpected—because if the last few years have taught us anything, it’s that you never know what’s coming next.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.