Notification of a Force Majeure Event (Commercial Transaction) (Annotated)
Editor’s Note: In many commercial agreements, the parties stipulate that certain events beyond a party’s reasonable control that prevent or delay the party’s performance (“Force Majeure”) will constitute an excuse for that party. Typical Force Majeure events include natural causes (fire, storms, floods), governmental or societal actions (war, invasion, civil unrest, labor strikes), infrastructure failures (transportation, energy), etc. Force Majeure clauses usually exclude overall economic conditions such as stock market or interest rate fluctuations that may affect businesses or the economy generally. The party affected by Force Majeure is usually obligated to provide prompt written notice to the counterparty of the occurrence of the Force Majeure event (in reasonable detail) and the expected duration of the event’s effect on the party. Some agreements may provide that a disruption in a party’s performance due to Force Majeure extending beyond a stated period is cause for termination of the agreement.
A form of Force Majeure notice follows.
FORM OF FORCE MAJEURE NOTICE
Re: Supply Agreement dated [DATE]
Ladies and Gentlemen:
We are writing to confirm the message conveyed in a [Telephone Call or E-Mail] on [DATE] to your [NAME OR TITLE].
Comment: Frequently, the affected party will alert counterparties of a force majeure event in an immediate broadcast telephone or email message followed by a more complete written confirmation. Depending on the nature of the event and the party affected, counterparties may first learn of the occurrence in a news report. In any event, it is in the affected party’s interest to inform counterparties quickly to put them on notice that a force majeure is being declared.
On [DATE] our manufacturing facility in [LOCATION] was severely damaged by [Hurricane, Storm, Electrical Fire, or Other Specific Cause Listed or Described as a Force Majeure Event in the Parties’ Commercial Agreement], resulting in a [Complete; Partial] shutdown of the facility. All shipments of goods and materials to or from the facility are curtailed pending further investigation and damage assessment.
In accordance with section xx of the above referenced agreement, we are hereby declaring the occurrence of an event of force majeure, which excuses our performance while the effects of this event are continuing.
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Comment: The party affected by force majeure will want to review carefully the force majeure clause of the commercial agreement and mirror the wording of the clause as closely as possible in its declaration to the counterparty, both as to the specific event constituting the force majeure and its consequent effect on the party’s performance. During the period of the force majeure, non-affected parties may seek to cover their purchase or sale requirements from alternate sources.
At this time, we anticipate that the facility will be closed for at least [DURATION]. We will provide updates regarding this situation [At Regular Intervals], [Including by Press Release or Public Statement].
Comment: During the course of a force majeure event, the contracting parties are likely to engage in a number of formal and informal communications regarding the damage caused by the event and status of the affected party’s recovery.
Please direct any questions about this matter to [NAME].