Force Majeure (FM)

By September 21, 2022No Comments

Force majeure is generally intended to cover occurrences beyond the reasonable control of a party to a contract. It is a common clause in contracts that essentially frees parties from liability or obligation when an extraordinary event or circumstance beyond the reasonable control of the parties, such as a war, strike, riot, crime, or an event described by the terms act of God or natural catastrophe (hurricane, flood, earthquake, volcanic eruption, etc.),changing laws, prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure. Lenders will generally wish to see a detailed and exclusive list of FM events in project contracts, in order to limit the ability of project counterparties (such as EPC contractors or Offtakers) to obtain release from their obligations under those contracts.