Business contracts are important when two businesses are working together. These contracts are usually written with performance in mind. Each side is bound by specific terms and deadlines, and they likely both expect that those terms will be met without any issue.
While the contract may go exactly as planned, there’s no guarantee that it will happen. Sometimes, one party’s actions or lack of action may be the reason the contract doesn’t go as planned. In other places, things outside of either party’s control may be the cause.
Protecting against the unknown is part of the contract’s job
Many business contracts have a clause that offers protection from those unexpected issues that can mean a contract doesn’t go as planned. A force majeure clause is one that addresses extraordinary events that neither party can control.
Force majeure clauses can be as simple or detailed as the parties want. Some outline specific circumstances, such as natural disasters, labor disruptions, war, government actions or public health emergencies. If any covered event occurs, the clause can modify the terms of the contract, excuse a party or delay the completion of the contract.
Force majeure clauses must include wording that limits how long delays can be. It may have a term that allows for termination of the contract after a certain period of time.
Force majeure clauses are only one part of a solid business contract. Companies need to ensure they have a contract that protects its rights and interests. Working with someone familiar with these matters may be beneficial since that individual can review the contract to determine if it’s set up as intended.
