Why You Should Include a Force Majeure Clause in Your Contract

Force majeure is a French term which translates to “superior strength”. Despite its foreign origins, force majeures frequently show up in Australian contracts. Force majeure clauses address what happens when events beyond the control of either party disrupt the contract. This article sets out what force majeures are and how a force majeure clause may benefit you.

What is a Force Majeure?

From a contractual perspective, force majeure is about risk allocation. The clause often addresses the consequences of a party breaching or failing to perform their contractual obligations as a result of certain events. A force majeure clause typically excludes a party’s liability if the reasons for their breach directly connected to one of these events. It is therefore crucial that any contract clearly defines the phrase ‘force majeure event’.

The general principles of a force majeure event are that:

• the event was outside the party’s reasonable control;
• it was not reasonably foreseeable the event would occur; and
• the party was not in a position to or was unable to prevent the consequences of the event.

Examples of when a force majeure clause would be useful include:

What to Include in a Force Majeure Clause

For a force majeure clause to be effective, it is crucial to consider including the following terms:

Key Takeaways

Force majeure clauses are activated when the contract cannot be performed and none of the parties are at fault. Therefore, you ensure greater protection from unforeseen events by expressly including a force majeure clause in your contracts. As such, you should make sure to:

• determine whether you will benefit from a force majeure clause. To do this, you should consider what unforeseeable events or risks you want to be protected from;
• analyse the specific provisions of the force majeure clause to determine whether it will benefit you. For example, if you receive goods or services, the clause should be drafted carefully so the provider cannot rely on it for all potential events; and
• remember that the force majeure clause is for events beyond the reasonable control of a party. Consequently, you cannot rely on the clause if the contract’s disruption stems from your actions or failures to act.

Force majeure clauses are important tools in minimising your liability in circumstances outside your control. If you would like assistance in drafting a contract to include a force majeure, contact one of LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.