A force majeure clause in a contract is a provision that excuses a party’s performance due to unforeseeable and uncontrollable events, such as natural disasters, war, or government actions. This clause is important in mitigating risks for both parties involved since it provides a safeguard against events that are beyond their control. In any contract negotiation, it’s important to understand how to write a force majeure clause to ensure that both parties are protected.
Here are some key steps to consider when drafting a force majeure clause:
1. Define the scope of the clause
The clause should identify the specific events that would trigger it. These events should be clearly defined, such as strikes, epidemics, or acts of God. The events should be as specific as possible, so there is no ambiguity about what is and isn’t covered.
2. Describe the effect on the contract
The clause should state the consequences of the triggering event. Typically, the effect is that the parties’ obligations are temporarily suspended, and the deadlines are extended until the event passes. It should also specify whether either party can terminate the contract in the event that the force majeure event continues for an extended period.
3. Establish notice requirements
The clause should require the parties to provide written notice to each other when a force majeure event occurs. This notice should include the date of the event, the cause, and the expected duration. It is essential to ensure that the notice provisions are clear and specific to avoid disputes down the line.
4. Identify the conditions for termination
If either party can terminate the contract after a force majeure event, the clause should be clear about what constitutes a valid reason for termination. It is essential to specify the notice period required before either party can terminate the contract, along with the other provisions required to terminate the contract.
5. Detail the consequences of the termination
The clause should specify the consequences of the termination, including any payment due, the resolution of liabilities, and the return of property. This is especially important in a force majeure event that occurs near the end of the contract term.
6. Include a catch-all provision
It’s important to include a catch-all provision that covers any unforeseen events not expressly listed in the force majeure clause. This provision should state that any event beyond the parties’ control that causes a delay or failure to perform constitutes a force majeure event.
In conclusion, a force majeure clause is a critical element in all contracts. Writing an effective clause requires careful consideration of the specific industry, the parties’ obligations, and the potential risks. Following the above steps will ensure that the clause protects both parties and is enforceable in the event of unforeseen circumstances.