by Rebecca Hegarty, Commercial Lawyer, Coleman Greig Lawyers
What is force majeure in supply contracts?
A key feature of crisis is often the unpredictability of its duration. Often supply contracts, by way of a force majeure clause, contemplate crisis situations arising and their impact on the ability of a business to continue supply. A force majeure clause is one that allows for suspension of liability during the impact of an event that is beyond the reasonable control of the parties. It is worth reading your supply contracts to see if they contain a force majeure clause and consider what that clause allows you to do.
What does ‘force majeure’ mean?
Force majeure is a French term literally meaning ‘greater force’ or ‘superior strength’. It is understood to mean something that is unexpected and beyond control. When we see a force majeure clause in a contract, its purpose is to provide relief from liability for the parties from having to perform their contractual obligations or to provide a timeframe allowing extension of time to perform in light of the force majeure event. At the core of the applicability of the clause is that there must be a link between the event and the impact on performance ability under the contract.