Understanding Force Majeure

Companies that conduct their business internationally encounter different import and export risks associated with their transactions. Many of them are foreseeable and maneuverable. However, it is the unforeseen risks, circumstances known as force majeure, that make even the most responsive companies accept that there are always some things beyond their control.

Force majeure, French for superior force, is a clause written into a contract that exempts or suspends a business from having to fulfill its legal obligation. It can suddenly and unexpectedly occur as a natural event, a foreign political event or a manmade event.

Natural Events

Natural events are provisionally covered under force majeure when their occurrence extends beyond what is either written specifically into a contract or what is deemed predictable. Some examples of unpredictable natural events that could impact a contractual obligation include:

  • Earthquakes
  • Tornadoes
  • Flooding

Foreign Political Events

The unpredictability of foreign governments and their affairs can interfere with contract fulfillment. One notable example of a foreign political event that could lead to import and export risks is a war.

Manmade Events

The range of manmade events that could classify as force majeure is broad. With so many diverse industries conducting global business, it is impossible to consider every possible scenario. Some of the more common events include:

  • Strikes
  • Lockouts
  • Unexpected government legislation

While it is possible to preemptively strategize for some import and export risks, responsible companies also recognize the possibility of unforeseen events interrupting the flow of their commerce.