What does 'Force Majeure' mean
Force majeure is a French term literally translated as "greater force", this clause is included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations.
BREAKING DOWN 'Force Majeure'
Force majeure is related to the concept of an "act of God," meaning an event for which no party can be held accountable, such as a hurricane or a tornado. Force majeure also encompasses human actions, however, such as armed conflict. Generally speaking, for events to constitute force majeure, they must be unforeseeable, external to the parties of the contract, and unavoidable (irresistible). These concepts are defined and applied differently by different jurisdictions.
The concept of force majeure originated in French civil law and is an accepted standard in many jurisdictions that derive their legal systems from the Napoleonic Code. In common law systems such as the U.S. and the U.K., force majeure clauses are acceptable, but must be more explicit about the events that would trigger the clause.
The International Chamber of Commerce has attempted to clarify the meaning of force majeure (though force majeure is not included in Incoterms) by applying a standard of "impracticability," meaning that it would be—if not necessarily impossible—unreasonably burdensome and expensive to carry out the terms of the contract. The event that brings this situation about must be external to both parties, unforeseeable and unavoidable. It can be very difficult to prove these conditions, however, and most force majeure defenses fail in international tribunals.
In any jurisdiction, contracts containing specific definitions what of constitutes force majeure—ones that respond to local threats—will hold up better under scrutiny. Even in systems based on civil law, the application of the concept can be strictly limited. For example, say an avalanche destroys a supplier's factory in the French Alps, causing long shipment delays and leading the client to sue for damages. The supplier might employ a force majeure defense, arguing that the avalanche was an unforeseeable, external and irresistible event (the three tests applied by French law). Unless the contract specifically named an avalanche as removing the supplier's liability, the court may well decide that the supplier owes damages: French courts have deemed an event "foreseeable" because a similar event had occurred half a century before. Similarly, a war in a conflict-ridden zone might not be "unforeseeable"; nor might currency controls in struggling economy or a flood in a frequently-affected area.
In general, force majeure is in tension with the concept of "pacta sunt servanda" (agreements must be kept), a key concept in civil and international law with analogs in common law. It is not supposed to be easy to escape contractual liability, and proving that events were unforeseeable, for example, is onerous by design.
As time goes on, we are becoming aware of new threats, such as solar flares, asteroids and super-volcanoes. We are also developing new threats, or aware that someone might be, such as cyber, nuclear and biological warfare capabilities. These have raised questions about the what is and is not "foreseeable" in a legal sense. We are also becoming increasingly aware of human agency in events that have generally been considered "external" or "acts of God," such as certain seismic activities. Ongoing litigation is exploring questions of whether drilling and construction projects contributed the very natural disasters that rendered them unworkable. In short, the concepts that underpin force majeure are shifting.