Allocating risk through force majeure in commercial agreements

Commercial contracts need to account for the unexpected – or as we might say on May 4th, an unforeseeable “disturbance in the Force.” Force majeure clauses do that job, excusing performance where events beyond your control make it impossible or impractical.

Force majeure clauses are found in most commercial contracts and operate as a safety valve, excusing one or both parties from their obligations when events beyond anyone’s control – whether a pandemic, war or government action – disrupt performance. This article considers how these clauses work, why drafting matters and what businesses should consider when agreeing to them.

The critical point is this: under English law, force majeure isn’t something the courts will imply into a contract. If the contract doesn’t include a force majeure clause, the concept simply doesn’t apply. Everything depends on the words the parties have agreed. The drafting – that is, the actual language used – determines who is protected and who is left exposed when things go wrong.

The Galactic Empire learned this lesson the hard way when it overlooked a single thermal exhaust port in the Death Star’s design. A poorly drafted force majeure clause carries the same risk: one gap in the language and the entire position can unravel.

The Death Star’s blueprint: constructing force majeure clauses

How a force majeure clause is written determines when it can be relied on and how much protection it offers. There are broadly two approaches. The first is a narrow clause that lists specific events, for example war, pandemic or strikes. The second is a broader clause that uses general language, such as events “beyond reasonable control”.

Each approach has advantages and drawbacks. A narrow clause provides certainty, because the parties know exactly what’s covered, but it may fail to capture an event no one anticipated. A broad clause casts a wider net but can lead to disputes about whether a particular event falls within its scope. The approach taken often reflects the relative bargaining power. Suppliers tend to prefer broad clauses that give them more room to rely on force majeure. Customers, on the other hand, typically favour narrow clauses that limit the circumstances in which a supplier can step away from its obligations.

Importantly, a force majeure clause isn’t a free pass. The event must have genuinely caused the failure to perform, not simply made things more difficult or less profitable. For example, if a supplier fails to deliver goods and seeks to rely on a port strike, it must show the strike actually prevented distribution. If the supplier had not yet manufactured the goods, the strike is not the real reason for the failure and the clause will not assist.

The specific words used in the clause also matter. A requirement that performance be “prevented” sets a high bar, meaning it was physically or legally impossible. Words like “hindered” or “delayed” set a lower bar, making it easier for the affected party to rely on the clause. In practice, buyers tend to prefer “prevented” because it’s harder for a supplier to invoke, while suppliers favour “hindered” because it offers greater flexibility.

Force majeure clauses also usually require the affected party to act promptly, both by notifying the other side and by taking reasonable steps to reduce the impact of the event. Standing still is not enough. Much like Chewbacca’s continual efforts to keep the Millennium Falcon running under pressure rather than abandoning it, a party relying on force majeure is expected to do what it reasonably can to keep things moving.

Together, these requirements of cause, notice and mitigation control when a force majeure clause can be invoked and how the consequences of disruption are shared.

“I’ve got a bad feeling about this”: commercial priorities

When a force majeure clause is triggered, it generally leads to one of two outcomes:

• Suspension, which pauses the contract but keeps it alive, allowing the parties to pick up where they left off once the disruption passes
• Termination, which brings the contract to an end, giving one or both parties a clean exit where continuing no longer makes commercial sense.

These two outcomes reflect different commercial priorities. Suspension suits parties who want to preserve the relationship and resume once the disruption passes. Termination suits parties who need to limit their losses and move on.

This distinction mirrors the Rebel evacuation of Hoth in The Empire Strikes Back: staying put would have exposed the Rebels to catastrophic risk, making strategic withdrawal the only rational option. The choice between suspension and termination should be considered carefully at the drafting stage, because once a force majeure event occurs, the clause will dictate the options available.

A New Hope

Force majeure clauses show that commercial risk can’t be eliminated, only managed through careful drafting. Every element matters: which events are covered, how directly they must affect performance, what the affected party must do and what happens if disruption continues.

The true advantage lies in securing the contractual high ground at the outset – because, in both a galaxy far, far away and in commercial practice, the battle is often won before it has begun.