Contracts are an important part of business relationships because they set clear expectations for both sides and can lay out what will happen if the terms aren’t met. These legal documents have many factors contained within them. One clause that might be included in this document is a force majeure.
A force majeure clause spells out what will happen if the contract’s terms aren’t met for a reason that neither party can control. Understanding how a force majeure works is critical for anyone who’s going to sign a contract.
What situations qualify for a force majeure clause?
Force majeure clauses are customized for each contract. They can be broad, such as including only natural disasters, but they can also be narrow, such as spelling out that the clause goes into effect if there is a snowstorm that results in a foot of snow. These clauses don’t only apply to natural disasters. They can also be used to address things like supply chain delays. It’s critical that the exact terms of the clause are in writing so there isn’t any room for misunderstanding.
What happens if a covered event occurs?
If a covered event occurs, the terms of the force majeure will go into effect. This may mean that the contract is simply extended until the terms can be met. It’s also possible that the contract will be terminated. This is determined by what’s written in the document.
There are times when the parties may not agree on whether the situation should trigger the force majeure. In that case, they may go to court to have a decision made about the contract. This could mean that the non-performing party has to prove that the circumstances met the requirements of the contract, which may require the assistance of someone familiar with these matters.