Given the recent downturn in the global economy, many clients are unable to meet their contractual obligations and are looking for a method with which to relieve themselves of their potential liabilities. A force majeure clause may be just such an option.

A force majeure clause is typically used to discharge a contracting party when a supervening event, beyond the control of either party, makes performance of an obligation impossible. The event is usually unexpected and something beyond reasonable foresight and skill. Examples of such events are "acts of God", the Queen's or public enemies, war, acts of terrorism, the authority of the law, or labour unrest or strikes. Many force majeure clauses apply equally to both sides, excusing either party from its obligations in the event of a triggering event.

It is unlikely that a party to a contract will negotiate a force majeure clause that acts to relieve the other party from making a payment or honouring its financial commitment. Rather, force majeure clauses are typically found in agreements (i.e. leases and development agreements) where the contracting parties have some sort of non-financial obligation. For instance, a lease requiring a landlord to perform certain work may have a force majeure clause. That being said, parties are not restricted in their ability to contract and courts will most likely uphold the terms and obligations set out in a contract so long as the parties to the contract are equally sophisticated and there is no undue influence by one party over another or an imbalance of power. Therefore, parties can agree to include any number of triggering events in the force Majeure clause. In the Supreme Court of Canada case Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp and Paper Co. [1976] S.C.R. 580 the force majeure clause in the contract which was the subject of the litigation included, among other things, "the non-availability of markets for pulp or corrugating medium."

Is the current state of the global economy a force majeure? The answer to this question will depend on a number of things including the particular facts of your case and the wording of your force majeure clause (a typical response from a lawyer, I know).

When negotiating force majeure clauses, be mindful that the clause applies equally to all parties to the agreement. Also, it will be helpful if the clause sets forth some specific examples of acts that will excuse performance under the clause, such as wars, natural disasters, and other major events that are clearly outside of a party's control. Inclusion of examples will help to make clear the parties' intent that such clauses are not intended to apply to excuse failures to perform for reasons within the control of the parties.