Force majeure

What is force majeure?

Force majeure means “higher power” in French and refers to circumstances that are unforeseeable and outside the control of man and prevent a party in an agreement from living up to the agreement’s terms. These can include natural disasters, war and so on.

The concept of force majeure contradicts the otherwise universal concept of “pacta sunt servanda - agreements must be kept”. Since contractual obligations are by design difficult to escape, proving that an event was unforeseeable is a difficult task. Also, with technological and scientific progress correlations between human influence and certain events has become more apparent. Thus, if an earthquake cripples the operations of a mining company but is discovered to be related to the mining operation itself, the company may have a hard time proving that the disaster was not foreseeable.

In order to be considered a force majeure, an event has to be:

• Unforeseeable - there was no way to predict that the disaster/conflict/etc. would occur when, where and how it occured
• External - the event was not the result of actions committed by the party itself or an associate of the party (employees, business partners…)
• Irresistible - the event was of such a nature that there was no way for the party to take appropriate countermeasures before or during the event

Examples of force majeure

Examples of force majeure include - among others - natural disasters, war or even economic restrictions suddenly imposed by a state. Once again, whatever the event, it has to be unforeseeable in order to be deemed a force majeure.

If a manufacturer builds a factory in a region frequently visited by tornadoes, damages incurred by such a storm most likely do not represent a force majeure. The same goes for operating in a conflict-ridden region and being hindered by war or terrorist attacks. Similarly, tariffs or taxes imposed by a state with a struggling economy will most likely be deemed foreseeable.

A relatively new example are cyber attacks. Due to the internet having become an indispensable part of business in a globalized world, almost every company relies on an IT infrastructure to some degree. Attacks utilizing methods or tools yet unknown may very well be classified as unforeseeable, especially as artificial intelligence and automation increase complexity in the business world.