What does a force majeure clause typically cover?

A force majeure clause is designed to protect parties in a contract from liability when certain unforeseen events prevent them from fulfilling their contractual obligations. These events are typically beyond the control of the parties involved, such as natural disasters (like earthquakes or floods), war, riots, legislative changes, or pandemics.

This clause recognizes that when significantly unexpected and uncontrollable events occur, parties might not be able to perform their duties as outlined in the contract. Consequently, the primary focus of a force majeure clause is on those unpredictable and extraordinary circumstances that hinder performance, rather than on regular business risks or predictable operational issues, which are often considered part of normal business risk management.

The inclusion of this clause helps provide clarity and legal protection, allowing for the possibility of contract performance being suspended or excused during the occurrence of these extraordinary events. Thus, it is essential in commercial contracting to mitigate the risks associated with potential disruptions that lie outside the control of the parties involved.