The Law Of War - Force Majeure

During times of war, when circumstances outside of parties' control interfere with commercial obligations, parties may turn to the doctrine of force majeure to excuse failures to perform. This has already happened during the first weeks of the war in Iran, when a number of companies have already claimed force majeure for disruptions to their businesses.¹

The law of force majeure can vary in different global jurisdictions, but the broad outlines of the doctrine under U.S. law are mostly the same. The validity of that excuse will likely turn on the specific triggering event, the causal link to the failure to perform, and any reasonable efforts taken to avoid or mitigate the effects. If the parties have a force majeure clause in their agreement, the express terms will control and the precise language, including any exclusions, will be of upmost importance under U.S. law. Recent events—including COVID-19, extreme weather and wildfires, and political policy swings—have further shaped force majeure precedent in the U.S. over the last decade. Proactive efforts to review applicable contracts, prepare contract notices and responses, and ensure compliance with force majeure requirements are critical early steps after war disruption.

Definition. Force majeure clauses are common contractual provisions that “allocate[e] the risk of loss if performance becomes impossible or impracticable, esp[ecially] as a result of an event or effect that the parties could not have anticipated or controlled.” FORCE-MAJEURE CLAUSE, Black's Law Dictionary (12th ed. 2024). Acts of war are commonly included as triggering events in force majeure clauses and Black's Law Dictionary defines the term “force majeure” as including “both acts of nature (e.g., floods and hurricanes) and acts of people (e.g., riots, strikes, and wars).” FORCE MAJEURE, Black's Law Dictionary (12th ed. 2024). Certain federal regulations also define force majeure events as including “acts of war or terrorism.” See, e.g., 40 C.F.R. § 60.487.

Common Law: Impracticability Not Impossibility. Generally, performance does not have to be absolutely “impossible” to be excused under force majeure. Force majeure is distinct from the common law doctrine of impossibility. See Mieco, L.L.C. v. Pioneer Nat. Res. USA, Inc., 109 F.4th 710, 720 (5th Cir. 2024) (collecting cases). Instead, force majeure is comparable to the doctrine of “impracticability.” Both the Uniform Commercial Code (“UCC”) and the Restatement (Second) of Contracts (the “Restatement”) have provisions addressing impracticability that, like force majeure, contemplate war as a triggering event capable of excusing performance. Under the UCC, if a “war. . . causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance” it may excuse performance based on a failure of a presupposed condition. U.C.C. § 2-615, cmnt 4. Under the Restatement, if “war” causes a “severe shortage of raw materials or of supplies” and “causes a marked increase in cost or prevents performance altogether,” performance may be excused. Restatement § 261, cmnt. d. Similarly, under the Restatement, if “[w]ar breaks out” and a government orders a party to sell its product to the government instead of a commercial counterparty, the seller “is not liable for breach of contract.” Restatement § 264, Illustration 6.

Contract-Specific. The specific language used in a force majeure clause is critical and should be the starting point for any analysis. While common law principles exist as gap-fillers, the express language of a force majeure clause will control. See Perlman v. Pioneer Ltd. P'ship, 918 F.2d 1244, 1248 (5th Cir. 1990) (“the ‘doctrine' of force majeure should not supersede the specific terms bargained for in the contract”); TEC Olmos, LLC v. ConocoPhillips Co., 555 S.W.3d 176, 181 (Tex. App.—Houston [1st Dist.] 2018, pet. denied) (“A term's common-law meaning will not override the definition given to a contractual term by the contracting parties. . . However, we may consider common law rules to ‘fill in gaps' when interpreting force majeure clauses.”). Therefore, for war to constitute a force majeure event, it must be listed as such in the party's contract or be otherwise covered under the umbrella of a catch-all provision. See Mieco, 109 F.4th at 719 n. 11 (“only if the force majeure clause specifically includes the event that actually prevents a party's performance will that party be excused”); Felder v. Oldham, 199 Ga. 820, 825, 35 S.E.2d 497, 500 (1945) (“war is something which may be anticipated, as unpleasant as it is to do so, and against which parties can protect themselves by contract”). The specific language used may affect how broad or narrow it may be applied. There may be subtle differences in interpretation between an act of war, a declaration of war, an armed conflict, or an act of terrorism.

Exclusions. Many force majeure clauses, and common law doctrine, exclude certain circumstances from a valid force majeure defense. One common exclusion is a change in price that makes performance more costly. See Mieco, 109 F.4th at 720 (“merely to show that an uncontracted-for event making performance more costly does not qualify as force majeure”). Even when a war causes a commercial agreement to no longer make economic sense for the nonperforming party, it is not an excuse for performance. See, e.g., 7200 Scottsdale Rd. Gen. Partners v. Kuhn Farm Mach., Inc., 184 Ariz. 341, 351, 909 P.2d 408, 418 (Ct. App. 1995) (“although the Gulf War's effect on the expected level of attendance may have rendered the convention uneconomical, Kuhn was not on this ground relieved of its contractual obligation”). The scope of force majeure provisions and exclusions is routinely at the center of U.S. litigation.

Causation. Not all commercial obligations are excused during times of war—the war must be the cause of the non-performance. For example, during the Vietnam War, the U.S. Fifth Circuit Court of Appeals found that if “delivery delays were the result of the escalation of the war in Vietnam and were therefore excusable” because they fell within the terms of the parties' agreement, then the non-performing party was “not liable for any delays proximately caused by [a war-related] government policy.” E. Air Lines, Inc. v. McDonnell Douglas Corp., 532 F.2d 957, 980 (5th Cir. 1976). However, nonperformance was not excused if “the delivery delays were in fact the product of [the non-performing party's] mismanagement rather than the Vietnam conflict.” Id. at 987. And during the Gulf War, an Arizona appellate court found that when a company booked a resort to host a convention and “the Gulf War's effect on convention attendance” may have led to a frustration of purpose, there was “clearly no claim for impossibility or impracticability.” 7200 Scottsdale, 184 Ariz. at 345-46, 909 P.2d at 412-13. If a facility or delivery point is affected by a war-related government policy or is physically damaged because of acts of war, there is a stronger force majeure declaration than if there are war-related increases in price making performance more difficult or less desirable.

Reasonable Efforts. Parties seeking to invoke force majeure as a defense must also typically employ reasonable efforts or due diligence to both avoid and mitigate the effects of the triggering event. Just because war is a direct cause of nonperformance does not mean that a party can sit on its hands and fail to take reasonable action mitigate the effects. In some jurisdictions “the non-performing party has the burden of proof as well as a duty to show what action was taken to perform the contract, regardless of the occurrence of the excuse.” Route 6 Outparcels, LLC v. Ruby Tuesday, Inc., 88 A.D.3d 1224, 1225, 931 N.Y.S.2d 436, 437 (2011) (applying Pennsylvania law). However, determining what is “reasonable” is highly fact-specific and “[w]hether [a] force majeure clause excuse[s a party's] non-performance turns on those factual issues.” Mieco, 109 F.4th at 727. During times of war, examples may include considering if there are other personnel, another facility, route, or delivery point, or other sources reasonably available that would allow a party to fully or partially perform. Some courts may require the party seeking to invoke force majeure to explore those options before performance is excused.

Foonote

1. Within days of the start of the war, publicly available information indicates that QatarEnergy (the largest liquefied natural gas (“LNG”) producer in the world), Bahrain Petroleum Co. (Bahrain's state-owned energy company, which operates its only oil refinery), Sumito Chemical Asia (a major producer of Methyl Methacrylate), Formosa Petrochemical Corporation (a Taiwanese energy company), and Yeocheon NCC (the largest ethylene production facility in South Korea), among others, have declared force majeure.

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