What is a Force Majeure Clause?
A force majeure clause is a standard contract clause that exists to protect businesses from situations beyond their control
A force majeure clause is a standard contract clause that exists to protect businesses from situations beyond their control. The term "force majeure" refers to an act of God or an unavoidable natural disaster, such as an earthquake or tornado. A force majeure clause typically protects the business against losses due to such events.
For example, if a company is unable to deliver products on time because of an earthquake or other natural disaster, it might not be at fault for failing to meet its contractual obligations if they have a valid force majeure clause in place.
Governmental regulations, company misconduct, and changes in financial conditions don't qualify you for force majeure protection
If a contract is suspended because of force majeure, the parties aren't obligated to fulfill their obligations.
The term “force majeure” refers to events that are considered beyond the control of one party and often outside of their ability to plan for or predict, such as an unexpected natural disaster. A natural disaster typically covers any event where property damage results from fire, flood, earthquake, hurricane or other weather-related events.
However, if your business is in a flood zone and knows that it's at risk for severe flooding on a regular basis but doesn't take steps to protect its employees or property during these times (such as putting up sandbags), then the resulting damages may not qualify under force majeure protection.
A force majeure clause has a number of benefits for both parties
A force majeure clause has a number of benefits for both parties. First, it protects businesses from loss of money and time. For example, if there's an unexpected natural disaster or other event that causes a delay in completion of the project, then this clause would allow the company to renegotiate its contract with you without facing legal consequences. It also ensures that the parties can't be sued for not fulfilling the contract as originally agreed upon.
Finally, it helps businesses avoid penalties and other legal issues that may result from non-performance on their end due to unexpected circumstances beyond their control (such as natural disasters).
Several steps can help you create the best possible force majeure clause
A force majeure clause is an agreement between parties that certain events will be considered as a “force majeure” and therefore exempt the party from any liability, penalty or financial obligation. It’s important to create this clause carefully and thoroughly so that it can be legally binding, with clear language outlining what qualifies as a force majeure event.
Here are some steps that can help you create a good one:
Define your terms: What do you mean by force majeure? Do you plan to include only certain types of events (i.e., natural disasters such as earthquakes), or everything from acts of God to acts of war? Also, define which party has the burden of proof in cases where an event is disputed.
Make sure it's legally binding: The agreement should be signed by everyone who is going to be involved in contracting, including all parties with authority over contract execution. These documents should also contain language stating that these documents take precedence over any previous versions; otherwise, someone could claim that their previous version was still valid even if they haven't signed anything new since then (which would lead back to legal problems).
Overall, a force majeure clause can save your business if your operations are disrupted by an out-of-control event
Overall, a force majeure clause can save your business if your operations are disrupted by an out-of-control event.
If you're planning on entering into a contract for services or products, it's good to know that the party providing those services or products may be protected from liability if they are unable to perform due to one of many reasons specified in the clause (like fire damage or natural disasters). The party receiving these goods and services can also use this clause as protection if they have been damaged by an uncontrollable event.
There are many other advantages to having these clauses included in contracts: It helps ensure performance on both sides so that neither party gets penalized for non-performance; it reduces liability for non-performance; and it helps prevent litigation between parties because they know what their responsibilities are without having to go through the court system first.
Make sure you understand what types of events are covered by this type of contract clause and how you can use it if the need arises
If you're not sure what types of events are covered by this type of contract clause and how you can use it if the need arises, don't be afraid to ask. A good lawyer will be able to explain the basics of a force majeure clause in layman's terms so that you can make an informed decision on whether or not your business should include one in its contracts moving forward.