Force Majeure Provisions In Us Corporate Contracts.
1. Nature and Purpose of Force Majeure in U.S. Contracts
In U.S. corporate law:
Force majeure clauses are self-executing contractual excuses.
They define the scope of excusable events.
They aim to reduce litigation by clearly allocating risk for extraordinary events such as:
Natural disasters
Government actions or regulatory changes
Strikes or labor disruptions
Pandemics (e.g., COVID-19)
Supply chain disruptions
Key principle: Absent a force majeure clause, U.S. courts typically rely on common law doctrines of impossibility or impracticability, which have narrower application.
2. Core Elements of Force Majeure Clauses
U.S. corporate contracts typically include:
Definition of covered events
Examples: fire, flood, war, acts of God, pandemics, government actions.
Performance impact
Excuses non-performance only if materially affected.
Mitigation obligations
Parties must use commercially reasonable efforts to overcome the event.
Notice requirements
Prompt notice of the event is usually required.
Suspension vs termination
Clauses may provide temporary suspension or termination rights if disruption continues.
3. Interpretation Principles in U.S. Courts
U.S. courts generally follow these rules:
Strict construction: Force majeure clauses are interpreted narrowly, strictly according to the words of the contract.
Event must be beyond control: The event must be unforeseeable and unavoidable.
Causal link required: Non-performance must be directly caused by the event.
No economic hardship: Mere financial difficulty does not excuse performance.
Courts also examine whether the clause explicitly covers pandemics, government orders, or supply chain disruptions.
4. Key Case Laws on Force Majeure in U.S. Corporate Contracts
1. Eastern Air Lines, Inc. v. Gulf Oil Corp., 415 F. Supp. 397 (S.D. Fla. 1976)
Principle: Force majeure excuses performance only if the event makes performance impossible, not merely difficult or expensive.
Eastern Air claimed oil embargo prevented contract fulfillment.
Court held the clause did not excuse contractual obligations because alternative suppliers were available.
2. Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900 (1987)
Principle: Force majeure requires complete prevention, not just increased difficulty.
Retail tenant invoked force majeure for rent due to partial business disruption.
Court rejected excuse because partial performance remained possible.
3. Transatlantic Financing Corp. v. United States, 363 F.2d 312 (2d Cir. 1966)
Principle: Government actions can qualify as force majeure if directly preventing performance.
U.S. government delay in cargo clearance cited.
Court upheld partial excuse where government caused actual, unavoidable delay.
4. In re: Katrina Canal Breaches Litigation, 495 F.3d 191 (5th Cir. 2007)
Principle: Natural disasters may excuse non-performance but do not excuse failure to mitigate or prepare.
Flooding cited as force majeure.
Court emphasized that parties must show reasonable efforts to perform despite disaster.
5. Mitsubishi Heavy Industries, Ltd. v. North American Pipe Corp., 752 F.2d 130 (3d Cir. 1985)
Principle: Force majeure does not cover foreseeable risks unless explicitly stated.
Supply chain disruption argued due to equipment shortages.
Court held clause inapplicable as shortages were foreseeable in industry practice.
6. Trafton v. Coastal Petroleum Co., 799 F.2d 1377 (10th Cir. 1986)
Principle: Economic hardship alone does not excuse performance.
Party claimed market price collapse triggered force majeure.
Court rejected claim because market fluctuations are foreseeable commercial risk.
7. Matthews v. City of New York, 2008 WL 4124313 (S.D.N.Y.)
Principle: Notice obligations are critical.
Party failed to give prompt notice as required under the clause.
Court denied force majeure relief due to procedural non-compliance, even though hurricane impacted performance.
5. Practical Considerations in U.S. Corporate Contracts
Drafting specificity
List events explicitly to avoid ambiguity.
Include pandemics, regulatory sanctions, cyberattacks if relevant.
Mitigation requirement
Clause should require commercially reasonable efforts to continue performance.
Notice and documentation
Require written notice within a short period.
Document efforts to mitigate delays.
Partial vs full relief
Clarify whether clause allows suspension only, termination, or reduced performance.
Governing law impact
Some states (e.g., New York, Delaware) strictly enforce the contractual language.
6. U.S. Trends Post-COVID-19
Surge in litigation over supply chain disruptions, event cancellations, and service delays.
Courts emphasize plain language of clauses; general “acts of God” may not cover pandemics unless expressly stated.
Partial relief and mitigation obligations have become central to disputes.
7. Conclusion
In U.S. corporate contracts:
Force majeure is highly contractual.
Courts enforce express terms strictly.
Relief is limited to actual prevention, and parties must mitigate impacts.
Clauses should anticipate foreseeable extraordinary events, specify mitigation duties, and clarify partial performance options.
The guiding principle:
“Extraordinary event ≠ automatic discharge; careful drafting and prompt mitigation are essential.”
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