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. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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. 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.
  2. 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.
  3. Personal Finance

    Market Economy

    In a market economy, economic decisions and prices are determined by market forces rather than by central planning.
  4. 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.
  5. Insights

    Trump Sued Over Foreign Emoluments

    The federal lawsuit alleges that Trump is at risk of violating a clause in the constitution.
  6. Trading

    Futures, Derivatives and Liquidity: More or Less Risky?

    Futures and derivatives get a bad rap after the 2008 financial crisis, but these instruments are meant to mitigate market risk.
  7. Retirement

    Buyout Offer? 12 Ways to Tell If It’s Good

    When you are presented with a package, take a close look at these elements – and be sure to negotiate, if possible.
  8. Investing

    8 Lease Clauses You Need To Know

    If you're renting an apartment this year, beware of signing contracts with these tricky clauses.
  9. Financial Advisor

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
RELATED TERMS
  1. Contingency Clause

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

    A reinsurance treaty clause indicating that the agreement should ...
  3. Subordination Clause

    A clause in an agreement which states that the current claim ...
  4. Alienation Clause

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

    A release clause is a mortgage term that refers to a provision ...
  6. Waiver Of Inventory Clause

    A clause in an insurance policy that says that the insurance ...
Hot Definitions
  1. Stagflation

    A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, ...
  2. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  3. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  4. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  5. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  6. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
Trading Center