Energy and natural resources
Force majeure
A contract clause that excuses a party when an extraordinary event outside its control stops it from performing.
Facts checked against sources onWhat does Force majeure mean?
Force majeure (French for "superior force") is a clause that frees a party from liability when events it could not control, such as war, natural disasters, epidemics or some government actions, prevent it from meeting its contract. Which events count, and what notice must be given, depends on the wording of each contract and the governing law. It is common in energy, commodities, shipping and construction. Example: an LNG plant is damaged and declares force majeure on 10 cargoes of 3.5 million MMBtu each; a buyer that must replace them on the spot market at 4 more per MMBtu faces an extra cost of 140 million with no compensation from the seller. Buyers manage this risk by using several suppliers and holding storage.
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Related terms
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