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 is the consumer price index (CPI) used in market escalation contracts?

    Understand the purpose of market escalation contracts and learn how the consumer price index (CPI) is often used to make ... Read Answer >>
  4. What is a common strategy traders implement when using the Force Index?

    Learn about how traders and analysts use a momentum oscillator called the force index to measure trend strength for a given ... Read Answer >>
  5. What are the best technical indicators to complement the Force Index?

    Find out which technical tools pair best with the Force Index to generate and confirm trading signals, such as lagging indicators ... Read Answer >>
  6. 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 >>
Related Articles
  1. Personal Finance

    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. Markets

    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.
  3. Personal Finance

    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.
  4. Personal Finance

    Life Insurance Clauses Determine Your Coverage

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

    Discovering The Force Index

    Learn how to measure the power of bulls behind rallies and bears behind declines.
  6. Personal Finance

    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.
  7. Personal Finance

    Soon, You Can Sue Your Bank Again

    Americans are going to regain the right to sue a bank or credit card company – but not in all cases. We explain what changes and what doesn't.
  8. Markets

    Market Economy

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

    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.
  10. Investing

    Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
RELATED TERMS
  1. Force Majeure

    A French term literally translated as "greater force", this clause ...
  2. Contingency Clause

    A contract provision that requires a specific event or action ...
  3. Honorable Undertaking

    A reinsurance treaty clause indicating that the agreement should ...
  4. Escalator Clause

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

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

    A clause included in certain debt securities and swap agreements ...
Trading Center