force majeure clause

Force majeure clauses are designed to mitigate the affect of the doctrine of frustration.  These clauses are included in contracts to excuse performance of parties where some intervening event which is outside the control of the contracting parties takes place. Performance may become impossible altogether or in a manner which is substantially different from how the parties envisaged at the time the contract was formed due to some intervening event.

Effect of Force Majeure Clauses

The requirement for performance is usually postponed or suspended for a limited period of time, and may require notice in order to rely on the contractual clause. In the absence of a force majeure clause the contract would be frustrated, and the parties are relieved of any further obligation to perform and the contract terminates. Frustration may arise for any number of reasons which include government interference, such as a change in the law which relates to the subject matter of the contract, performance of the contract becomes illegal or say consent is not able to be obtained from a regulatory authority required for the contract to be performed.

Force majeure clauses should specify the events or describe the circumstances which are beyond the parties control which are contemplated by the parties which will excuse delay of performance. The general law of frustration will only excuse delay where the contract has become impossible to perform or there is some supervening illegality. Parties to contracts usually expressly agree:

1. to exempt one another for liability for breach of contract where events arise which fall into the categories of events described;
2. the contract remains in force for the duration of the relevant event; and
3. the obligation to perform arises after the relevant (for majeure) event has ended.

Force majeure events

Force majeure events are events that are outside the reasonable control of the parties. Example of events include acts of terrorism, acts of God, power failures, industrial action, flood, earthquakes, natural disasters rebellion, and nationalisation. For simplicity, the parties may chose to dispense with shopping lists of events and simply use the phrase "circumstances outside the usual control of the parties" or "an event outside the reasonable control of the parties".

A short form example of such a clause may be:

"Neither party to this agreement shall be liable for failing to perform or delay of performance, if delay is caused by circumstances or events outside their reasonable control, which shall include but not be limited to industrial action, acts of God, terrorism, civil commotion, refusals to grant licences or permissions, [etc].

The time for performance shall be extended for a reasonable time, having regard for the cause of the delay upon reasonable notice in writing to the other party. Should such delay persist for a period of over 28 continuous days either party may give notice to terminate this agreement on 7 days' notice in writing."