Force Majeure and Business Continuity: Why the Clause Is Not a Plan

A force majeure clause decides who bears the loss when a disaster stops a contract from being performed. It does not keep a single process running. That is the most important thing to understand about force majeure in business continuity: the clause is a tool for allocating blame and cost after the fact, and your customers will not care which party the contract excuses.

Business continuity leaders should still care about these clauses, for one reason. When your critical vendor invokes force majeure, it is excused. You are not. Here is what the clause does, what it doesn’t, and what to check in your vendor contracts before the next disruption.

A note before we start: this is a practitioner’s view, not legal advice. Have your counsel review any specific contract.

What Force Majeure Means

Force majeure is French for “superior force.” In a contract, a force majeure clause excuses or suspends a party’s performance when a listed event beyond its reasonable control prevents it from performing. The typical list includes natural disasters, war, terrorism, strikes, government action, and epidemics, usually followed by a catchall such as “or other causes beyond the party’s reasonable control.”

In the United States, force majeure is mostly a creature of the contract itself. What the clause says is what you get, and courts tend to read these clauses narrowly. Two cases show the range:

• In Kel Kim Corp. v. Central Markets (New York Court of Appeals, 1987), a roller rink tenant could not obtain the $1 million in liability insurance its lease required during the liability insurance crisis of the 1980s. The court refused to excuse the tenant. The force majeure clause did not cover an inability to obtain insurance, and the problem was foreseeable when the tenant signed.
• In JN Contemporary Art v. Phillips Auctioneers (Second Circuit, 2022), an auction house postponed a spring 2020 auction during the pandemic. The court held that the pandemic and the government shutdown orders that followed fell within the clause’s language covering “circumstances beyond our or your reasonable control,” and the auction house was excused.

The lesson from both cases is the same. The outcome turns on the exact words in the clause and the facts of the event. COVID-19 did not automatically count as force majeure. Some clauses reached it and some didn’t, and a business that simply became less profitable was rarely excused.

The Role of Force Majeure in Business Continuity

Here is the gap most organizations miss. Force majeure protects the party that cannot perform. In your vendor contracts, that party is the vendor.

Say your payroll processor, your logistics carrier, or your cloud provider loses a data center to a flood. If its contract with you has a broad force majeure clause, it may owe you nothing for the outage. Your obligations to your own customers, employees, and regulators do not pause. Your payroll still has to run. Your shipments still have to arrive.

I hear a version of this in nearly every program review. Ask what happens if a critical provider goes down for days, and someone answers, “We have a contract.” As I said on Managing Uncertainty, Episode 327: “That’s not a plan. That’s hope.”

What a Force Majeure Clause Will Not Do

• It will not restore your operations. Being excused from paying damages is not the same as delivering to customers.
• It will not protect your reputation. Customers don’t care that the outage was your vendor’s fault. They remember that you went dark.
• It will not excuse negligence or poor planning. Most clauses require the event to be beyond the party’s reasonable control, and many require the party to mitigate. A foreseeable risk you chose not to plan for is a weak basis for a claim.
• It will not cover what it doesn’t list. If cyberattacks, utility failures, or supplier failures are not named, don’t assume the catchall will reach them.
• It will not line up automatically. Your supplier’s clause and your customer contract’s clause are separate documents. Your supplier can be excused while you remain on the hook to your customer.

What to Check in Your Vendor Contracts

Start with the vendors that matter. Tier them by the impact of a disruption, not by how much you spend with them. As I put it on Episode 137: “Most big vendors are large and complex enough to have a good business continuity program in place. They’re not typically the vendors that you’re going to need to be the most concerned about.” The small, sole-source provider often is. Your business impact analysis should tell you which ones are critical. Our guide to third parties in business continuity covers how to find them.

For each critical vendor, read the contract with your counsel and answer these questions:

1. Which events are listed? Look for pandemics and epidemics, government orders, cyberattacks, utility and telecommunications failures, and failures of the vendor’s own suppliers.
2. How broad is the catchall? Is it limited to events “similar” to the listed ones, or does it reach any cause beyond reasonable control?
3. What notice is required, and how fast? A clause that lets the vendor tell you days later is a continuity risk in itself.
4. Does the vendor have to mitigate? Look for an obligation to activate its own business continuity and disaster recovery plans, not just to use “reasonable efforts.”
5. How long can performance be suspended, and who can terminate? You need the right to walk away and move to an alternate provider if the suspension runs long.
6. Does the vendor commit to a tested plan? Ask for recovery time objectives that match your business impact analysis, evidence of exercises, and a right to participate in one.
7. Do your customer contracts match? Compare the clauses you rely on from suppliers with the clauses you promise to customers. Close the gaps before a disruption does it for you.

One of the buyer problems on our third-party exercise page says it plainly: “Contract says they’ll notify us in 24 hours. In their last incident, we found out from a customer.” The contract language and the vendor’s real behavior are two different things. The only way to learn the second is to practice it. That is why we run joint exercises with critical vendors, and why I made the case on Episode 281 that you should exercise with your vendors and key partners.

Build the Plan the Clause Assumes You Have

Force majeure clauses quietly assume that both parties have done their homework. Courts look at whether the event was foreseeable and whether the party tried to mitigate it. That is exactly what a business continuity program produces: a record that you identified the risk, built a recovery strategy, and practiced it.

So use the clause as one input, not as the strategy:

• Identify critical dependencies through your business impact analysis, including the vendors behind your vendors.
• Build alternatives for the ones you can’t afford to lose: a second source, a manual workaround, inventory buffers, or a pre-negotiated alternate provider. Our post on supply chain resilience goes deeper.
• Review insurance with the same eyes. Business interruption and contingent business interruption coverage can pay for some losses. Like the clause, it pays later; it doesn’t restore anything.
• Exercise the vendor failure. Run a tabletop exercise where your most critical provider invokes force majeure on day one. Watch what your team does in the first hour.

The contract tells you who pays. Only your plan tells you whether you are still in business when the bill arrives.

Keep Going

A few ways to go deeper if this was useful.

• Read more. Resilience, crisis management, and continuity writing at Bryghtpath Insights, or the structured Ultimate Guide to Business Continuity.
• Close the vendor gaps. Our Business Continuity services find your critical dependencies and build the recovery strategies your contracts can’t.
• Get a maturity score. Our Resiliency Diagnosis® is a standards-based review that produces a maturity score and a prioritized roadmap.
• Talk to us. Set up a call to think through your program with us.