In spite of your best efforts, you find that your business cannot fulfill its requirements to another party under a signed agreement. Will you be in breach of contract? If your contract includes a force majeure clause, your business might be in the clear.
A company that does not complete its contracted obligations does not always willfully breach its agreement. If a force majeure clause covers your inability to fulfill your agreement, your contracted partner cannot hold you liable for breaching your contract.
The meaning of force majeure
Entrepreneur explains that the words “force majeure” mean “superior force.” It is a reference to an event that neither you nor the signatories to your contract could anticipate and is beyond the control of all parties involved.
Natural disasters are common instances of uncontrollable events. A sudden storm or earthquake may damage your work inventory or machinery, delaying or even permanently impairing your ability to deliver goods or a service. Government-initiated actions such as wars or lockdowns could also qualify.
The effectiveness of a force majeure clause
A force majeure clause may not protect your business if it is too vague. The other signatories to your contract might object if the contract does not specify an event to qualify as a force majeure condition. You could also have problems if you fail to notify your contracted partner about a force majeure occurrence within a specified time frame.
Different factors can influence how a force majeure dispute turns out. Sometimes catch-all language is enough to cover many unexpected events. However, some jurisdictions interpret force majeure language more strictly than others. Working out a dispute resolution method in your contract may give you control over which court hears your case or allow you to go to mediation or arbitration instead.