Common Contract Terms: Force Majeure
If you’ve ever read a commercial contract, you’ve probably come across a force majeure clause. At the time, you probably wondered, what the heck is a force majeure clause, but contracts are long and Latin is hard and so maybe you breezed past it.
Force majeure is a Latin phrase that means “superior force.” It’s a standard clause in commercial contracts that gives the parties a way to deal with unexpected disasters, like war, fire, earthquakes (Seattle may be next), hurricanes, terrorist acts, and the like. This clause is also sometimes referred to as an "act of God” clause.
This means excusing some or all of the parties from their contractual obligations when a force majeure event happens and/or splitting up the risk between the parties if such an event occurs. How this is done depends on the circumstances of each particular contract and is often a topic of negotiation by the parties.
Tip: An economic disaster, such as a stock market crash, isn’t recognized by courts as a force majeure event, and so you should not assume you can get out of your contractual obligations simply because economic disaster strikes.
Other Common Contract Clauses