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What's a force majeure clause?

You have a contract with an important foreign supplier, and you're relying on those shipments -- but they don't come. Your supplier explains that they cannot meet their obligations because there's been a sudden change to their country's laws interfering with exports. They invoke the force majeure clause in their contract, effectively ending their obligation to you.

Can they do that? Probably. Force majeure clauses are part of many contracts, although they're seldom something that people notice -- until they suddenly become important. A "force majeure" refers to some kind of unforeseeable "superior force" that is beyond the control of either party.

What constitutes a force majeure? Essentially, it could be anything involving:

  • A declaration of war between two countries that affects supply, production or exports
  • Weather events like hurricanes, tornados and tsunamis
  • Acts of terrorism that interfere with production or delivery
  • Fires, explosions or other causes of destruction to a business
  • Labor strikes or walkouts that significantly disrupt business
  • Shutdowns due to government orders or health concerns
  • Changes in legislation from the government that make production or delivery impossible

It's important to recognize, however, that events that make a contract inconvenient or impractical (or just unprofitable) to fulfill don't usually trigger a force majeure clause. If, for example, some disaster causes the price of the steel (your supplier needs to make its products) to skyrocket, that may make your supplier unhappy -- but it doesn't excuse them from their contractual obligation to you.

Naturally, every force majeure clause may be a little different. Exactly what happens to your deal with the other party can vary, depending on the contract's specifics. If you're uncertain what happens next or what you can legally do to improve your situation, talk to an experienced business law attorney today.

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