Force Majeure Events

12 April 2026 in Contract Lawyers | 6 min read | skip to FAQs

The meaning of force majeure, in civil law is said to be “causes you cannot prevent and for which you are not responsible”. This article explores the issue of how unforeseeable events outside of a party’s control may excuse a party’s performance under a contract. More specifically, what options or rights both parties have under contracts when such events occur.

Overview

A force majeure event, which recently are becoming increasingly frequent, is an event that is:

1. Irresistible;
2. Unforeseeable;
3. External to the party claiming discharge from their obligations; and
4. Has made performance of the contract impossible, and not merely more onerous or difficult.

Where relief is sought on the basis of a force majeure event, a causal connection must be established between the circumstance relied on and the effect on performance.

A force majeure clause does not operate to relieve the affected party from a breach of contract, constituted by a failure of performance. Rather, it prevents such failure from becoming a breach of contract, for which the affected party is liable.

Function and Origin

Elements of a Force Majeure Clause

Force majeure clauses, whilst extremely varied and subject to individual drafting, commonly contain five elements:

1. Specification of Relief
2. Causal Link
3. Force Majeure Event or Circumstances
4. Obligations of the Affected Party
5. Transition from Suspension to Termination

No Implied Force Majeure

A force majeure clause cannot be implied into contracts where it is not expressly included in the terms of the contract.

Specification of Relief

For such relief to be available to the affected party, the clause must specify the intended scope of relief, identifying both the obligations it applies to, and whether it applies to prevention, hinderance and/or delay in performance.

A force majeure clause gives rise to any or all of the following types of relief:

1. Relief against prevention of performance;
2. Relief against hinderance of performance; and
3. Relief against interruption to, or delay in performance.

In the current economic and political climate, the most likely application is to provide relief against the consequence of delays in performance or a short period of failure to perform, rather than a total failure to perform, caused by events such as armed conflicts, fluctuations in fuel prices and broader economic or geopolitical instability.

Causal Link

Notwithstanding the type of relief sought under a force majeure clause, a causal connection must be established between the circumstance relied on, and its subsequent effect on performance.

The typical principles of causation apply in ascertaining the existence of such a causal link. Where the contract in question has a commercial nature, it must be given a business-like interpretation. Otherwise, causation is assessed by reference to what would have happened if the force majeure event did not occur.

However, proof of a causal link does not only require proof of a connection, but also the elimination of any other alternative methods of performance as viable options.

Example – European Bank Ltd v Citibank Ltd (2004) 60 NSWLR 153; [2004] NSWCA 76

European Bank made a deposit with Citibank in Sydney. Citibank transferred the funds to a general account, held in the United States, to minimise currency risk exposure. The account, and its funds, were seized under a warrant from a US court. When European Bank sought to withdraw its funds, Citibank refused to pay, relying on a force majeure clause in the deposit contract, relieving Citibank if performance was prevented, hindered or delayed by any event which occurred due to reasons beyond its control. The court held that the seizure had not prevented, nor hindered performance. Further, that overseas warrants do not affect domestic debts, as European Bank’s debt was governed by Australia law, any refusal or failure of payment of the deposit by the US branch pursuant to the warrant does not protect Citibank.

Force majeure Event or Circumstances

A force majeure event requires a form of physical or legal restraint. This can take the form of any event beyond the control of a party, by which the ordinary prudent person could not have avoided, except specific matters where responsibility is assumed under the contract.

However, a force majeure event does not extend to cover usual incidents interrupting work, where the contracting parties are assumed to have considered them in the making of the contract.

Acts of God

A term still commonly found in force majeure clauses is an “act of God”, which has been defined as an event “… due to natural causes directly and exclusively, without human intervention, and that … could not have been prevented by any amount of foresight and plans and care reasonably to be expected”.

In Commissioner of Railways v Stewart (1936) 56 CLR 520, the court found that the most violent rainstorm is not an act of God, as weather effects are within the normal contemplation of a reasonable man.

Accidents

The word ‘accident’, for the purposes of force majeure events, does not include situations which should have been in the contemplation of the parties, but are not covered in the contract.

Other Events Beyond Control

Where a contract’s force majeure clause only states ‘events beyond the control of the party affected’, there is no scope for limitation by reference to any specific circumstance.

The court has found that a force majeure event has occurred where the party concerned could not have done anything to prevent the event

Where the clause defines a force majeure event generally, for instance “events beyond the control of the party”, followed by specific examples, for instance, “nationwide energy shortages, or unavailability of fuel”, the general may be limited by the specific examples.  This rule of contract interpretation is called  ejusdem generis.

Obligations of the Affected Party

Force majeure clauses typically require the affected party to both give notice to the other contracting party and mitigate the effect of the force majeure event.

Giving Notice

Notice is a direct requirement where the contract clause prescribes that notice of a force majeure event must be given, and the time frame in which it is to be given. Where no time frame is specified, the party impacted by the event will, by implication, be required to give notice within a reasonable time after becoming aware of the event.

Where the contract is silent as to the requirement of notice, the court will determine if it had to be communicated by reference to the particular wording of the clause.

Mitigating the Effect

Despite an express statement to mitigate effects in the contract clause, the impacted party has an obligation to mitigate the impact of the force majeure event.

Examples of Mitigation

1. In Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115; [2006] FCA 1324, the charterer was obliged to mitigate the consequences of the original event, cancellation of a coal purchase, beyond its control by finding alternative cargo. Their failure to do so resulted in their loss of ability to rely on the force majeure clause.
2. The court in Seadrill Ghana Operations Ltd v Tullow Ghana Ltd [2018] EWHC 1640 (Comm) found that failure to approve a new oil field to drill on, even for commercial reasons, constituted a lack of mitigation of the force majeure event – temporary prohibition imposed by the Government on drilling.

Right to Terminate

Where the clause stipulates relief against the suspension of services by extending the time of performance, there will typically be a time period which allows the other party to terminate the contract if the suspension of performance extends past a certain time period.

How BSM Sydney Lawyers can assist you

The highly experienced contract lawyers at Brander Smith McKnight Sydney Lawyers have decades of experience in complex contract review, negotiation, drafting and finalising. Our contract lawyers have utilised the legal concept of force majeure events in commercial contract negotiations including drafting force majeure clauses into contracts. The senior contract lawyers at Brander Smith McKnight Sydney Lawyers offer a free 20-minute consultation to advise when a force majeure clause is appropriate in a contract.

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