Force Majeure literally means “greater force”. These clauses excuse a party from liability if some unforseen event beyond the control of that party prevents it from performing its obligations under the contract. Typically, force majeure clauses cover natural disasters or other “Acts of God”, war, or the failure of third parties–such as suppliers and subcontractors–to perform their obligations to the contracting party. It is important to remember thatforce majeure clauses are intended to excuse a party only if the failure to perform could not be avoided by the exercise of due care by that party.
When negotiating force majeure clauses, make sure that the clause applies equally to all parties to the agreement–not just the licensor. Also, it is helpful if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, and other major events that are clearly outside a party’s control. Inclusion of examples will help to make clear the parties’ intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.
Force Majeure: Example Clauses
|1. Neither party shall be liable in damages or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including, but not limited to Acts of God, Government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected.2. Neither party shall be liable for any failure or delay in performance under this Agreement (other than for delay in the payment of money due and payable hereunder) to the extent said failures or delays are proximately caused (I) by causes beyond that party’s reasonable control and occurring without its fault or negligence, including, without limitation, failure of suppliers, subcontractors, and carriers, or party to substantially meet its performance obligations under this Agreement, provided that, as a condition to the claim of nonliability, the party experiencing the difficulty shall give the other prompt written notice, with full details following the occurrence of the cause relied upon. Dates by which performance obligations are scheduled to be met will be extended for a period of time equal to the time lost due to any delay so caused.||Commentary: These examples are typical of force majeure clauses in commercial contracts. As is common practice, these clauses excuse a party from performing its obligations if the failure is caused by subcontractors, suppliers and/or carriers. In agreements for on-line access to remote databases, such clauses may excuse failures due to problems with phone lines or third parties. To make sure that the parties know exactly what is and is not a legitimate excuse for failure to provide access to licensed materials, it would be better to specifically set forth the circumstances that excuse a failure of performance, rather than rely on a general force majeure clause. Force majeure clauses are usually applicable to performance failures caused by:
Disruptions in service caused by one or more of the following should not be excused by a force majeure clause:
Many force majeure clauses apply equally to both sides, excusing either party from its obligations in the event of a triggering event; however, few clauses excuse the failure to pay money. For all practical purposes, the clauses will only excuse failures to perform by the licensor. Accordingly, licensees should seek express guarantees of some level of minimum access from licensors. (See Licensor Performance Obligations)
|3. [Licensor]’s failure to perform any term or condition of this Agreement as a result of conditions beyond its control such as, but not limited to, war, strikes, fires, floods, acts of God, governmental restrictions, power failures, or damage or destruction of any network facilities or servers, shall not be deemed a breach of this Agreement.||Commentary: This clause only excuses the licensor–and not the licensee–from its contractual obligations. This seems one-sided, but if the licensee’s only obligation is to pay money as discussed above, the clause may be acceptable. If, however, the licensee has other non-payment obligations, a clause like this should be replaced with one that gives both parties the same protection.|