What is a force majeure clause?
Written by For Founders Law, a Toronto firm licensed by the Law Society of Ontario. About us
Short answer
A force majeure clause excuses a party from performing a contract, or delays performance, when an event outside its control prevents it, such as a natural disaster, war, government order or major infrastructure failure. In Canada the clause only does what its wording says: courts look at the listed events, whether the event actually prevented performance, and any notice requirements. Without a clause, a party may have to rely on the narrower doctrine of frustration.
Force majeure is French for “superior force”. The clause allocates the risk of events neither party caused and couldn’t reasonably prevent.
What does a force majeure clause usually cover?
Most clauses list specific events, then add a general phrase such as “or any other cause beyond the party’s reasonable control”. Common events: fire, flood, earthquake, war, terrorism, epidemics, government orders, strikes, and failures of utilities or telecommunications networks.
Courts read the list closely. The Supreme Court of Canada described force majeure as covering an unforeseen event, outside the parties’ control, that makes performance impossible, in Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp & Paper Co., [1976] 1 S.C.R. 580. In that case, the mill couldn’t rely on the clause because its difficulty was one it had brought on itself. Modern clauses often go further, but only as far as their wording.
What does it usually not cover?
- Payment obligations. Most clauses say a party can’t use force majeure to avoid paying money owed.
- Events that only make performance more expensive. Higher costs or a worse deal usually aren’t enough.
- Events you should have planned for. For a SaaS vendor, an outage your backups and redundancy should have handled may not qualify.
- Your own subcontractors’ failures, unless the clause says so.
What should a SaaS contract say?
| Term | Why it matters |
|---|---|
| Listed events | Include cloud provider and internet failures, and cyberattacks you couldn’t reasonably prevent, if you want them covered |
| Notice | Prompt written notice of the event and its expected effect |
| Mitigation | A duty to use reasonable efforts to limit the impact and resume |
| Duration and termination | Either party can end the contract if the event lasts beyond a set period |
| Fees | Whether fees stop accruing during the event, and whether prepaid fees are refunded |
Enterprise customers often ask that a vendor’s business continuity and disaster recovery obligations still apply during a force majeure event. Align the clause with your SLA exclusions.
What if the contract has no clause?
A party may argue the contract is frustrated: an unforeseen event has made performance radically different from what was agreed. Frustration is hard to establish, and it ends the contract rather than suspending it. Ontario’s Frustrated Contracts Act then deals with money already paid and expenses incurred (s. 3). A clear force majeure clause gives both sides more predictable results.
How does it interact with the liability cap?
A force majeure clause excuses non-performance; a limitation of liability clause limits damages for non-performance that isn’t excused. You need both.
What to do next
We draft SaaS and master services agreements and review contracts you’ve been sent as a contract review, at fixed fees on our fees page.
This guide is general information about Ontario and Canadian law, not legal advice for your situation. If an event is affecting a contract now, book a free 15-minute consult.