Force Majeure
Force majeure is a force against which you cannot act or fight.
Every contract has a force majeure clause. It usually includes natural disasters such as an earthquake, flood, fire, etc. It can also list such contingencies as war, embargo, sanctions. Along with this there are some other circumstances beyond the Sellers' control. The Seller may find himself in a situation when he can't fulfil his obligation under the Contract. It may happen if there is general strike in the country, a strike of coal-miners, transport workers etc. Production may be suspended if there is a shortage of the energy supply. When negotiating a contract a list of contingencies must be agreed on and put into the Contract.
When a manager makes up a contract he must not think only of his one-sided interest. He must think in terms of common interest with his counterpart. Only then will he prove loyal to his partner.
In case of a contingency the Seller must notify the Buyers of a force majeure. The Article of the Contract to this effect may run:
"Should the Seller fail to notify the Buyer of a contingency the Seller is denied a right to refer to these circumstances". The Seller is to notify the Buyer of a contingency right away. If it's done in due time the Buyer may take immediate action to protect his interest. He may sign a contract with another supplier on similar terms or if it's impossible he will secure the best possible terms he can have at the moment. If prices are rising he will be quick to act and will do everything possible to negotiate the best price obtainable at the moment.
A force majeure must be a proven fact. The Seller is to submit to the Buyer a written confirmation issued by the Chamber of Commerce to this effect. The certificate testifies that a contingency really took place. It describes its nature and confirms its duration.
In a dispute between the Buyer and the Seller not only the fact of a contingency is to be ascertained. The Seller must have evidence that non-execution of a contract or its partial fulfillment is a direct result of a contingency. If it is proved the Seller is not liable and the execution of a contract is postponed until all the after-effects causing damage are eliminated. A natural disaster may last only a few minutes but it'll take a lot of time to recover the loss.
The duration of a force majeure is, as a rule, 4 or 6 months. After that the Buyer has a right to cancel the contract. The Seller in this case has no right to claim any compensation for his loss
Vocabulary
force-majeure форс мажор, непереборна сила, перешкода; надзвичайні обставини
contingency непередбачена обставина, випадковість
suspend припиняти, тимчасово припиняти
shortage брак, дефіцит
negotiate а contract вести переговори про укладання контракту
make up а contract укладати контракт
notify smb of smth сповіщати когось про щось
duration тривалість
submit представити на розгляд
ascertain визначити, встановити
execution виконання
non-execution невиконання
liable відповідальний, зобов'язаний
eliminate усувати, ліквідувати
claim compensation вимагати сплати компенсації
Questions
What is the definition of force majeure?
What contingencies are listed in a force majeure clause?
Why is it very important to notify the Buyer of a contingency?
What document certifies the fact of a contingency?
What duration is usually stated in a contract for contingenсy?
Do you agree or disagree with the statement?
The wording of a force majeure clause must be very precise. When negotiating this point you must foresee the contingenсies which may be detrimental to you.