Force majeure clauses have become increasingly important in business contracts, especially in unpredictable times. These clauses help protect your business when events beyond your control make it difficult (or impossible) to meet your contractual obligations.
In this article, our contract lawyers, explains what a force majeure clause is, why it’s important, when it applies, and what to include when drafting one.
Key takeaways
A force majeure clause excuses performance of a contract due to unexpected events.
These events must be beyond the control of the parties.
Force majeure is not implied in Australian law – it must be written into the contract.
Every clause should list specific events, outline notice requirements, and define legal consequences.
What is a Force Majeure clause?
A force majeure clause is a contract provision that allows one or both parties to be excused from performance when certain unforeseeable events occur – events that are beyond the control of either party.
It typically applies when something major happens that:
Prevents performance
Delays delivery
Disrupts the contract entirely
These clauses are widely used in:
Service contracts
Event agreements
Supply and logistics arrangements
Construction contracts
If an event makes it impossible or illegal to fulfil your contractual duties, a valid force majeure clause could provide legal cover.
Common Force Majeure Events
Force majeure clauses provide a legal safety net, so you’re not held in breach of contract for failing to perform due to:
Natural disasters (e.g. floods, bushfires, earthquakes)
Government-imposed restrictions or lockdowns
Public health emergencies (e.g. pandemics)
War or terrorism
Strikes or industrial actions
Cyberattacks (in some modern contracts)
Force majeure clauses are just one way to deal with uncertainty in contracts. Another key strategy is effective risk allocation (especially in high-risk industries like construction). Learn more about risk allocation in construction contracts here.
Drafting a Force Majeure clause
Drafting this clause carefully and thoroughly is crucial in order for it to be legally binding. The language used should be clear and explain what qualifies as a force majeure event.
Remember: Unfair terms can be unenforceable. Be careful when drafting this clause and learn more on unfair contract terms
Here are some steps that can help you create a good one:
1. A List of Covered Events
Clearly identify what events are considered force majeure. You can use broad categories (like “natural disasters”) and include examples.
Example:
“This clause applies to any event beyond the reasonable control of the parties, including but not limited to natural disasters, government-imposed lockdowns, acts of war, or pandemics.”
2. A Causation Requirement
Make it clear that the event must directly affect the ability to perform. Courts require a strong link between the event and the disruption.
Example:
“Performance must be rendered impossible or substantially delayed due to the force majeure event.”
3. Notice Obligations
Specify how and when the affected party must notify the other party. This ensures both sides can respond appropriately.
Example:
“The affected party must notify the other party in writing within 5 business days of becoming aware of the event.”
4. Consequences of a Force Majeure Event
Explain what happens when the clause is triggered. Options may include:
Temporary suspension of obligations
Extension of time
Right to terminate if the event continues for a set period (e.g. 60 days)
Example:
“If the force majeure event continues for more than 30 consecutive days, either party may terminate the agreement without penalty.”
5. Exclusions (Optional)
You can clarify what doesn’t count – like economic hardship, supplier price increases, or foreseeable delays.
It’s important to ensure that force majeure clauses (and all contract terms) are properly drafted. While AI tools can be helpful, they’re no substitute for expert legal input. Here’s why relying on ChatGPT for contract drafting can be risky.
What should a Force Majeure not clause cover?
Assume your business is in a flood zone and knows that it’s at risk for severe flooding on a regular basis. Your business doesn’t take steps to protect its employees or property during these times (such as putting up sandbags). In this case, the resulting damage may not qualify under force majeure protection.
Again, this depends on the wording of the clause. However, it will typically require that even if a party had taken reasonable steps, they could not have avoided the issue.
Governmental regulations, company misconduct, and changes in financial conditions don’t qualify you for force majeure protection.
Force Majeure vs Frustration
If a contract doesn’t have a force majeure clause, parties may try to rely on the doctrine of frustration. But this is a high bar under Australian law.
Frustration only applies when performance becomes impossible, not merely inconvenient or unprofitable. That’s why force majeure clauses are the better option.
Learn more about frustration in our article.
Frequently Asked Questions
Is a force majeure clause mandatory in Australian contracts?
No, but it’s strongly recommended. Without it, you’re left with very limited legal options.
Can force majeure cover COVID-19 or future pandemics?
Yes, but only if the clause mentions “pandemics,” “public health emergencies,” or similar language.
Does a force majeure clause allow me to cancel a contract?
Only if it’s written that way. Most clauses allow for delay or suspension, and some allow termination after a set time.
Can price increases or market changes count as force majeure?
Usually not. Economic hardship alone is not enough unless specifically included.
