Force Majeure Clause

Definition - What does Force Majeure Clause mean?

Force Majeure Clause is the contract provision which allows any party to terminate or suspend performance of obligations when some circumstances which are beyond their control arise. These circumstances make the performance illegal, commercially impracticable, impossible and inadvisable. The provision may vary based on the project and jurisdiction. When a party asserts this clause for its failure to perform the obligation, then the non-performing party is required to prove that it took all reasonable steps to minimize the damage and the other party was given prior notice.

Petropedia explains Force Majeure Clause

Force Majeure Clause claims that a party is not responsible for its failure to perform the obligations to other party if the failure is as a result of the Acts of God, rebellion, insurrection, confiscation, nationalism, government sanction, labor dispute, civil war etc. When the reason for the failure is not this particular clause then the party is left to mercy of a narrow common laws contract attitude of frustration of purpose and impracticability that results rarely in the excuse of performance.

While negotiating the clause, it is suggested to ensure that the clause is applied equally to all parties and it includes particular examples of events which can excuse the performance under this clause.

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