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Force Majeure Clause in Contracts
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Force Majeure Clause in Contracts

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If the Force Majeure Clause is properly written, with the help of a risk management specialist, then your contracts will be more robust. …

If the Force Majeure Clause is properly written, with the help of a risk management specialist, then your contracts will be more robust.
Is something happens and one of the party invokes Force Majeure, then there will be less discussions, less chances to enter into litigation, and the situation will be resolved faster and cheaper.


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  • 1. Riskope Force Majeure Clause in Contracts By F. Oboni & C. Oboni Riskope International SA © 2010 www.riskope.com 1 Riskope's blog
  • 2. When an accident occurs we all want to resolve the situation quickly and efficiently. Sometimes litigation will make us waste time and money... in the aftermath of an accident. Riskope International SA © 2010 www.riskope.com 2 Riskope's blog
  • 3. Litigation is usually started based on: -Interpretation divergences • -Improper lingo -Omissions • Lawyers try to cover all possible issues when writing contracts Riskope International SA © 2010 www.riskope.com 3 Riskope's blog
  • 4. The Force Majeure clause is one of the key elements in any commercial contract. As Risk Managers we detect a widespread lack of clarity in the formulation of the clause of Force Majeure which can impair accident resolution. Riskope International SA © 2010 www.riskope.com 4 Riskope's blog
  • 5. The Force Majeure clause has potential to reduce discussions and potential litigation in the aftermath of an uncommon event, which is equivalent to “sparing time”, or reduce the impact of the mishap. If addressed properly! However let's see how it is addressed now... Riskope International SA © 2010 www.riskope.com 5 Riskope's blog
  • 6. From a contract: ...the term “event of Force Majeure” means an act of God, action of the elements, strike, lockout, work stoppage or other industrial disturbance, war , blockade, public riot, lightning, fire, storm, flood,... Then why not include: seismic, meteorological extremes events, solar and nuclear radiation, terrorism, sabotage, information warfare/hacking,...? Riskope International SA © 2010 www.riskope.com 6 Riskope's blog
  • 7. The problem is that the list can expand to infinity...but in practical terms it has to be written in such a way that: The list of potential hazards which possibly lead to a Force Majeure event is balanced: i.e. it has to be either generic or detailed, but should be consistent). But let's not stop here! Riskope International SA © 2010 www.riskope.com 7 Riskope's blog
  • 8. From the same contract: ...the event was not due to the fault or negligence of the affected party or requested, promoted or caused by it; Negligence and fault : should be defined in this particular contractual environment to avoid being regarded, or not, as a Force Majeure! Riskope International SA © 2010 www.riskope.com 8 Riskope's blog
  • 9. And also: ...such party has taken any reasonable precautions against such event of Force Majeure and any reasonable alternative measures of performing its obligations; Again reasonable precautions and reasonable alternative: should be defined in this particular contractual environment to avoid being regarded, or not, as a Force Majeure! And so on... Riskope International SA © 2010 www.riskope.com 9 Riskope's blog
  • 10. Force Majeure, negligence, fault, reasonable precautions, reasonable alternative etc... are all terms that need to be clarified and defined before the contract is signed. Riskope International SA © 2010 www.riskope.com 10 Riskope's blog
  • 11. How to perform that task ? Optimization will take the form of a more detailed explanation of terms, definition of threshold values (quantified), definition of mitigative levels that are considered “common practices” or “best practices”, and therefore a definition of negligence, as well as the limiting value of Force Majeure. Riskope International SA © 2010 www.riskope.com 11 Riskope's blog
  • 12. Thus the optimization of Force Majeure formulation constitutes an important proactive mitigative measure with very large ROI (Return On Investment). It will reduce discussions and litigation in the aftermath of an uncommon event, which is equivalent to “sparing time”, or reduce the impact of the mishap. Riskope International SA © 2010 www.riskope.com 12 Riskope's blog
  • 13. Contact Riskope to discuss how we can support you in optimizing your next contract's Force Majeure clause. coboni@riskope.com Riskope International SA © 2010 www.riskope.com 13 Riskope's blog

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