Do’s and Don’ts of Drafting Force Majeure Clauses

Do's and Don'ts of Drafting Force Majeure Clauses by Harald Sippler for Contract Nerds“Sorry, this falls under our force majeure clause because of COVID-19!”

This week didn’t start well: a voice message from your overseas supplier tells you that the port from which your container was to leave had to close because of an uptick in COVID cases in the area.

Does this sound familiar?

Since the pandemic began in 2020, force majeure has become dictum. Suppliers use it with the expectation that it will absolve them from any and all obligations under the contract. If you were fortunate not to have been affected by the grave supply chain interruptions around the world, chances are you might in the near future, and quite surely someone in your network has.

Despite force majeure having become a common part of most supplier contracts, we still see a lot of drafting mistakes and misconceptions about its purpose and use. This article will provide five best practices when it comes to drafting and negotiating better force majeure clauses.

Standardized Force Majeure Clause

The International Chamber of Commerce (ICC) created this guide on how to draft force majeure clauses using standardized language. The guide was updated in March 2020, at the beginning of the Pandemic. Many errors usually begin at the drafting stage, so make sure your clause is unambiguous and enforceable by adopting standardized language, wherever possible.

As we know, it may not be possible to use these standardized terms in every contract due to varying bargaining power, time constraints, company policy, or an otherwise lack of understanding as to its importance. If you are in a position where you cannot adopt the entire standardized clause, you can use these guidelines to improve the situation.

Rule 1: Use a catch-all definition rather than an exhaustive list.

Too often, we see force majeure clauses with an exhaustive definition, such as:

“Force majeure events” under this clause shall mean (i) wars; (ii) economic sanctions; (iii) pandemics; (iv) strikes; and (v) fires.

This seems to be reasonably broad, but many possible force majeure events such as floods, hurricanes and cyberattacks are not covered by this clause. Even the items mentioned lack clarity. Is a revolution a war? Would a trade embargo qualify as sanction? Are go-slows strikes? Is lava from a volcano the same as fire?

You are begging for trouble with exhaustive definitions. The recommended practice is to have a catch-all definition, such as:

Force majeure event” means the occurrence of an event or circumstance that prevents or impedes a party from performing one or more of its contractual obligations under this agreement. […]

Rule 2: Draft clear rules on post-event notifications.

Consider carefully how crucial time is to your business when drafting. If your inventory management method is “just-in-time,” then every single day matters. Your preference will then be to require your supplier to inform you about a force majeure event “as soon as possible.” If you operate on less stringent timelines, you may settle for “without delay” or “as soon as reasonably possible.”

If having a brief description of the force majeure event matters to your business–for instance because your own customers demand it–include language accordingly. If interim updates are helpful to you, include that requirement as well.

Notifications should always be sent by e-mail to your department’s general e-mail address (office@ or sales@). Don’t put a specific person as the recipient because the e-mail might get lost in the shuffle or may never reach the people who need to see it most.

Rule 3: Succinctly describe the consequences of an event.

After the occurrence of a force majeure event, it is common to temporarily relieve all parties from their obligations and their liability for damages or breach of contract. If time is of the essence for a particular contract, you may prefer that the force majeure event results in termination of the contract or at least affords you the option to terminate.

If the parties are temporarily relieved, make sure to include language saying that termination is possible if the force majeure event continues to persist after a specific amount of time, e.g., one month. Be clear that the suspended obligations will revive once contract performance becomes possible again.

Rule 4: Require a duty to mitigate the effect of an event.

A duty to mitigate damages exists under most statutory laws, but it doesn’t hurt to have it in your contract, too. In doing so, you may have an opportunity to increase the level of effort required by the other party. For example, you could go from relatively weak language “reasonable efforts” to stronger language like “all reasonable measures” or “best efforts.”

Courts and arbitral tribunals may not necessarily make a distinction when it comes to the interpretation of above terms, but it can be helpful to remind your contract partner when you are in the middle of a force majeure situation. Such as, “Please don’t forget you agreed to use best efforts to mitigate the effects.”

While you can’t force your contract partner to mitigate the effects, their failure to do so can constitute a breach of contract–in some cases, even if you accept the force majeure situation as such. On the other hand, if you don’t accept the force majeure situation, you could gain a strategic advantage in a dispute. For example, “They left us for dead, and refused to help us in any way. We then found out that their force majeure claim was made up too!

Rule 5: Make sure that no party is unjustly enriched.

Unjust enrichment refers to a benefit wrongfully gained and applies in case of contract termination. Imagine that you made a 50% down payment upon contract execution. The next day, a fire destroys your contract partner’s factory and the contract is terminated. If your contract partner does not return the down payment, they will have benefitted at your expense–unjust enrichment.

The most common mistake made here is to draft a narrow clause, such as, “any amounts paid must be returned.” What if your contract partner has already used those amounts to purchase materials or execute works? They won’t return the amounts in full without a fight. What if you have provided something in addition to “amounts paid” such as materials? Materials are not “amounts,” so you would lose out.

It is key to use very general language, such as, “for any benefit derived, a sum in USD equivalent to that benefit shall be paid.” This ensures that there is no unjust enrichment.

*               *               *

In our port-closure example in the introduction, COVID-19 is not the force majeure event. Arguably, it is the “law or governmental order” that is directly causing the closure. Has your business partner gotten this right? If not, its force majeure notification could be invalid and all obligations under the contract continue.

Force majeure clauses are tricky and when you are dealing with foreign business partners, there is an extra layer of complexity. Even when you use a standard clause, making a force majeure claim is not a straightforward process. But do keep in mind that force majeure has grave consequences. Emotions run high and we tend to say or do something which we would not ordinarily say or do. This may severely impact your contract and damage your overall relationship with your business partner.

I therefore highly recommend getting on board someone with broad experience in dealing with force majeure matters, ideally at the international level. Above all, you want to keep your business running and avoid getting into a big legal dispute.

For more on international force majeure and hardship, join the LinkedIn group called “Force Majeure & Hardship in Int’l Contracts & Disputes.”

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