Our colleagues in DLA Piper’s Energy group have published this article describing the interpretation of the contractual provision referred to as “force majeure”.  While the piece is focused on the use of this term in energy sector agreements, similar concepts and analysis are used in evaluating force majeure clauses in many types of contracts.  The phrase “force majeure” comes from the French and translates literally as “a superior force”.  It is used in legal documents to describe events or effects that are not anticipated and not controlled.  The term may refer to acts of nature (sometimes called “acts of God”) such as earthquakes or lightning, as well as acts of humans such as war or terrorism.  A force majeure clause in an agreement addresses risk allocation in the event performance of a contractual obligation (such as a delivery deadline for goods or services, up-time performance requirements in a SaaS model, or the obligation to provide useable space in a building lease) “becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.” (Black’s Law Dictionary, Thomson West).  The particular circumstances of your agreement and the bargaining power of the parties will determine whether you include a force majeure clause and if you do, what events will excuse performance of which obligations.

Read the full article here.

As our colleague in New York Wayne Kubicek writes:

At a time when climate, both political and meteorological, seems increasingly chaotic, concerns about the delivery of physical commodities are front and center in the energy sector.  Disruptions and delays in the delivery of such commodities, especially during periods of price volatility, raise important questions about performance expectations.

Lead commercial and operations personnel often find themselves asking these questions:

  • Does the claimed event constitute an event of force majeure (FM event) under the transaction agreement excusing performance by the claiming party?
  • Does the FM event delay performance or cancel it for the delivery in question?
  • If the FM event affects only the claiming party, what are the non-claiming party’s rights and obligations during the continuation of the FM event?
  • If the non-claiming party is in the middle of a distribution chain (either upstream or downstream of the FM event), does the FM event excuse the non-claiming party’s performance with respect to its upstream or downstream counterparty, as the case may be?

Read the rest of the article here.