A:

A force majeure is derived from the French term meaning "greater force" and refers to any natural and unavoidable catastrophe. A force majeure clause is included in contracts to remove liability when such events restrict participants from fulfilling their obligations. When negotiating these clauses, make sure that they apply equally and benefit all parties bound to the agreement. It may also be helpful to include some specific examples of acts that will be covered under the clause such as wars, natural disasters, and other major events that are clearly outside a party's control. Examples will help to clarify that the clause is not intended to apply to excuse failures to perform for reasons within the control of the parties.

(For more on this read, Preparing for Nature's Worst)

This question was answered by Katie Adams.

RELATED FAQS
  1. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Answer >>
  2. Can you ask your landlord to remove a waiver of subrogation clause from your lease?

    Learn how to remove a waiver of subrogation clause from a lease. Find out also why you might not want to strike this clause ... Read Answer >>
  3. How can an investor terminate a derivative contract?

    Read a brief overview about some of the different ways that derivatives traders can terminate their contracts early, including ... Read Answer >>
  4. Are waivers of subrogation clauses ever ineffective in preventing a third-party lawsuit?

    Learn why a waiver of subrogation clause in your lease or construction contract is no solid guarantee that you won't end ... Read Answer >>
  5. Besides Porter's 5 forces, what other forces shape industry in the 21st century?

    Know the forces, in addition to Porter's 5 forces, that influence 21st century corporate structure to effectively plan your ... Read Answer >>
Related Articles
  1. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  2. Personal Finance

    Why Your Will Needs a 'Titanic Clause'

    If you don't have a Titanic clause in your will and disaster strikes, there's no guarantee that your intended beneficiaries will inherit your assets.
  3. Investing

    Corporate Bonds and the Importance of Covenants

    Any type of investor, private or institutional, should be acquainted with the significance of covenants in corporate bond agreements.
  4. Investing

    Contingency Clauses In Home Purchases Contracts

    Real estate contracts often contain contingency clauses, which are conditions or actions that must be met for a contract to be binding.
  5. Insurance

    Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  6. Trading

    Discovering The Force Index

    Learn how to measure the power of bulls behind rallies and bears behind declines.
  7. Investing

    Contingency Clauses In Home Purchase Contracts

    Here, we introduce widely used contingency clauses in home purchase contracts and how they can benefit both Buyers and Sellers.
  8. Personal Finance

    Market Economy

    In a market economy, economic decisions and prices are determined by market forces rather than by central planning.
  9. Insurance

    What To Do If Your Insurance Won't Pay

    Before paying for coverage, find out what you need to do to ensure you get paid.
RELATED TERMS
  1. Escalator Clause

    A contract provision allowing for one to pass an increase in ...
  2. Abandonment Option

    A clause granting parties the option of withdrawing from the ...
  3. Acceleration Covenant

    A clause included in certain debt securities and swap agreements ...
  4. Alienation Clause

    A clause in a mortgage contract that requires full payment of ...
  5. Distribution Clause

    An insurance policy provision which determines how the coverage ...
  6. Release Clause

    A release clause is a mortgage term that refers to a provision ...
Hot Definitions
  1. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  2. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  3. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  4. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  5. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  6. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
Trading Center