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The purpose of a force majeure clause in a contract

On Behalf of | Jan 22, 2024 | Business Litigation

A common provision that is contained in many New York business contracts, a force majeure clause absolves the parties of their contractual obligations when it applies. This clause ends a contract when events beyond the parties’ control occur and materially affect their ability to perform. However, it must be drafted correctly and will only be effective under specific circumstances.

What is a force majeure clause?

A force majeure clause is a contractual provision recognized in business law that ends the duties of both parties to a contract, freeing them from performance without penalty. Typically, the parties will determine together the types of events that would cause the force majeure clause to go into effect. These specific events will likely be defined within the clause. However, even if one of the specific events occurs, it won’t cause the force majeure clause to take effect unless it materially impacts the ability of either party to perform their contractual duties.

When does a force majeure clause come into effect?

Before a force majeure clause can come into effect and end the contract, the following factors must be present:

  • Highly unusual, extraordinary event
  • Renders it impracticable or impossible for one or both parties to perform
  • Could not have been reasonably anticipated
  • Reasonable effort to complete a workaround without success

In some cases, a force majeure clause will not completely void a contract but might instead only relieve the parties from the performance of their duties under a specific part of the contract. For example, if civil unrest in the area where supplies are located makes it unsafe, the supplier might be absolved of providing materials according to the contracted timeline. Instead, the supplier might be expected to deliver the materials when the situation becomes safe enough to do so.