You and your business partners count on contracts to complete some of the essential parts of your business. During a negotiation, you decide the benefits that make up both sides of the agreement to meet your needs.
Unfortunately, there are times when circumstances out of your control make a contract impossible or very difficult to complete. When you include a force majeure clause in your contract, you can prepare for difficult times, even when you cannot predict what will happen.
Here’s how to prepare for the impact of a force majeure clause.
What is “force majeure”?
Force majeure means “superior force.” When it comes to your contracts, force majeure refers to an unforeseen circumstance that prevents one party from fulfilling their obligations under the contract.
A force majeure clause helps the parties of the contract know what happens if unforeseen circumstances will prevent the fulfillment of the contract. Often, when there is an event that is significant enough to fall under “force majeure,” the clause will excuse nonperformance.
Under what types of circumstances does force majeure typically apply?
Force majeure clauses are not intended to excuse nonperformance when there are minor inconveniences or setbacks. These clauses are for circumstances such as:
- Natural disasters
- Government shutdowns
In many cases, you will want to maintain your relationship even after an event that causes nonperformance. When you anticipate a force majeure event, communicate with the other party to let them know what is happening. If you can maintain communication in your relationship, you have a better chance of resuming your business dealings when times change.