The term force majeure refers to unforeseen events or circumstances beyond a party's control, (also referred to as "acts of God,") such as natural disasters, wars, or government actions. In contract law, a force majeure clause may allow one or more parties to either suspend or terminate their obligations under the contract when such extraordinary events prevent them from fulfilling their contractual duties..

Legal Standards for Invoking a Force Majeure Clause

Force majeure clauses cannot be invoked merely because a contract has become more difficult, expensive, or less profitable to perform or as a shield against foreseeable risks or circumstances that a party should have reasonably planned for. Rather, the following elements must usually be established: 

• Direct Causation: The party invoking the force majeure clause must demonstrate that the event directly prevented, hindered, or delayed their performance under the contract. This involves showing that but for the force majeure event, they would have been able to fulfill their obligations.
• Unforeseeability: The event must be unforeseeable at the time the contract was executed. This criterion underscores the essence of force majeure as covering only those events beyond the parties' reasonable anticipation and control.
• Unavoidability: It must be established that the effects of the force majeure event could not have been avoided through the exercise of due diligence or the adoption of reasonable measures.

Types of Events Typically Covered Under Force Majeure Clauses 

Events typically covered include: 

• Natural Disasters: Earthquakes, floods, hurricanes, and other acts of God are commonly cited events. The clause might specify the necessity for these to be of a certain magnitude or impact.
• Human-Made Events: This includes wars, terrorism, strikes, and civil disturbances. The inclusion of such events often depends on the contract's nature and the parties' risk assessment.
• Government Actions: Changes in law, embargoes, and governmental decrees can render contract performance illegal or impossible. These are increasingly important in a rapidly changing regulatory landscape.
• Pandemics and Public Health Emergencies.

Conversely, the following are generally not considered force majeure events:

• Ordinary Changes in Economic Conditions: Market fluctuations, difficulty securing materials at usual prices, or general economic downturns are usually not covered. These are assumed business risks.
• Foreseeable Events: If an event could have been reasonably anticipated and planned for (e.g., seasonal flooding in certain areas), it won't likely qualify as force majeure.
• Events Within a Party's Control: Breakdowns of a party's own equipment, labor issues within the party's company, or self-inflicted financial hardship generally don't qualify.

Consequences of Successfully Invoking a Force Majeure Clause

The ramifications of successfully invoking a force majeure clause can differ based on the jurisdiction, facts of the case, and the specific language of the clause as negotiated and agreed to in the contract, and may provide for:

• Suspension of Performance: A successful invocation typically results in the temporary suspension of the affected party's obligations under the contract. This suspension lasts for the duration of the force majeure event's impact on performance.
• Adjustment of Terms: In some cases, the parties may negotiate an adjustment of the contractual terms to reflect the changed circumstances, aiming for a fair and equitable resolution.
• Termination: If the force majeure event persists for an extended period, either party may have the right to terminate the contract, subject to the conditions outlined in the force majeure clause.

Example: A manufacturer of electronics components enters into a supply contract with a retailer. The contract includes a force majeure clause that specifically lists pandemics as a covered event. It further stipulates that in the case of a force majeure event, either party's performance obligations are suspended for a period of up to 90 days. Unfortunately, the COVID-19 pandemic disrupts global supply chains, and the manufacturer's production facilities are temporarily shut down due to government-mandated lockdowns. Additionally, key raw materials become unavailable due to border closures.

The manufacturer invokes the force majeure clause, citing the government restrictions and supply chain disruptions caused by the pandemic. Under the terms of the contract, the manufacturer's obligation to deliver components to the retailer is suspended for up to 90 days. During this period, the retailer cannot claim breach of contract for delayed deliveries.