When a force majeure event occurs, most parties assume the question is simply whether the force majeure clause applies. But there’s a more precise and often more consequential question: when the clause does apply, does it result in suspension of the contract or termination? These are fundamentally different outcomes with different consequences for both parties, and the contract language determining which one applies can have significant financial impact.
Suspension means the affected party’s obligation to perform is paused during the force majeure period, but the contract otherwise remains in place. When the force majeure event ends, performance obligations resume. Termination means the contract ends, and with it all future obligations. One is a temporary pause; the other is a permanent ending. Understanding which right applies in your contracts — and under what conditions each is available — is essential for planning how to respond when force majeure events occur.
The Default: Suspension
Most force majeure clauses default to suspension rather than immediate termination. The affected party’s performance obligations are tolled during the force majeure period, meaning they are neither required to perform nor in breach for not performing during that time. The other party’s corresponding obligations are typically also suspended — so if a vendor is excused from delivering services, the customer is generally excused from paying for those services during the same period. The contract itself remains in effect, and both parties are expected to resume their obligations when the force majeure event resolves.
Suspension is the appropriate default for most force majeure events because the parties entered the contract for specific commercial reasons, and those reasons typically don’t disappear because of a temporary disruption. A software vendor and its customer both benefit from the continuation of their relationship after a force majeure period ends. A supply agreement that has been operating successfully for years is worth preserving through a temporary disruption. Automatic termination for every force majeure event would destroy valuable commercial relationships unnecessarily.
During the suspension period, both parties retain their pre-force majeure rights and obligations other than the specific performance obligations that are suspended. Confidentiality obligations, IP ownership provisions, non-solicitation covenants, and other ongoing obligations that don’t depend on active performance typically continue through the suspension period. The affected party is also typically required to continue its mitigation obligations — actively working to overcome the force majeure event and restore performance as quickly as possible.
Suspension creates practical challenges for both parties that should be addressed in the contract. If payment is suspended during force majeure, what happens to outstanding invoices from before the event? If the customer has prepaid for a service period during which force majeure occurs, are they entitled to a credit or refund? If the force majeure event affects only part of the contracted services, is payment suspended for the entire contract or only for the affected portion? These questions are best addressed in the contract rather than left to negotiation in the middle of a disruption.
When Suspension Converts to Termination
Indefinite suspension is commercially untenable. Both parties need the ability to plan their businesses, and a contract that is indefinitely suspended provides neither party with certainty. For this reason, most well-drafted force majeure clauses include a duration threshold after which either party may terminate the contract. The threshold is typically expressed as a period — commonly 30, 60, or 90 days — after which termination rights arise if the force majeure condition has not been resolved.
The mechanics of the duration threshold matter. Some clauses provide that after the threshold period, the contract automatically terminates. Others provide that after the threshold period, either party may terminate by giving a specified period of notice. The automatic termination approach provides certainty but may create problems if the force majeure event is nearly resolved when the threshold is reached. A notice-based termination approach gives the affected party an opportunity to resume performance during the notice period and avoid termination, which is usually more commercially sensible.
The duration threshold should be calibrated to the nature of the contract and the type of force majeure events that are realistic possibilities. A 30-day threshold may be appropriate for a short-term service agreement where alternative providers can be quickly engaged. A 90-day threshold may be more appropriate for a complex supply agreement where alternative sourcing takes time to establish or for a construction contract where site-specific conditions limit the available alternatives. A threshold that is too short may result in termination before the parties have had a realistic opportunity to resolve the disruption; a threshold that is too long may leave the non-affected party trapped in a suspended contract for longer than they can operationally manage.
The Right to Terminate and Its Consequences
When force majeure persists beyond the duration threshold, the termination right is typically characterized as a termination for convenience or a no-fault termination — neither party is in breach, and neither party owes damages for the termination. This characterization is important because it distinguishes force majeure termination from termination for cause, which would entitle the non-breaching party to damages. In force majeure termination, the parties simply part ways without liability to each other for the termination itself.
The no-fault characterization of force majeure termination does not mean no money changes hands on termination. Provisions addressing what happens to prepaid fees, work in progress, and the return of property and confidential information should be addressed in the termination provisions. If the customer has prepaid for services not yet rendered, they’re entitled to a refund of the prepaid amount. If the vendor has performed partial work on a deliverable, they may be entitled to payment for the work completed to the point of termination. These financial consequences of termination should be addressed in the contract rather than left to negotiation at the time of termination.
Who holds the termination right also matters significantly. Many force majeure clauses give either party the right to terminate after the duration threshold. But in practice, the parties have asymmetrical interests: the non-affected party generally wants the ability to terminate so they can find alternative arrangements, while the affected party generally wants the ability to terminate so they can manage their obligations without indefinite uncertainty. Giving both parties the right to terminate is usually the most equitable approach and avoids the question of who has more leverage in the suspension standoff.
In some contracts, only the non-affected party has the termination right, on the theory that the affected party shouldn’t be able to escape contractual obligations by invoking force majeure and then terminating to avoid future obligations once the force majeure event resolves. This asymmetry has logic in situations where the force majeure clause could otherwise be used to escape an economically unfavorable contract — by invoking force majeure during a genuine event, then terminating before the situation resolves to avoid resuming performance on unfavorable terms. Consider this dynamic when negotiating the termination right structure.
Partial Force Majeure and Partial Performance
Force majeure events often affect performance partially rather than totally. A factory fire might shut down one production line while others continue operating. A natural disaster might affect delivery to one region while other delivery routes remain available. A government order might prohibit one service offering while others remain legal. These partial force majeure scenarios create complexity about the scope of the suspension and whether partial performance is required.
Contracts should address partial force majeure explicitly. The general principle in most jurisdictions is that a party must continue to perform to the extent not affected by the force majeure event. If you can deliver 60% of the contracted volume but not 100%, you’re generally required to deliver the 60% and may invoke force majeure only for the remaining 40%. Payment obligations should adjust correspondingly. Getting this right requires clear contract language that addresses how partial performance is measured, how payment adjusts, and how the duration threshold operates for partial force majeure situations.
Partial force majeure can also affect which party’s termination right applies. If a vendor is delivering 60% of contracted services but has invoked force majeure for the remaining 40%, can the customer terminate because of the partial failure? The answer depends on whether the partial failure is material to the customer’s use of the service. If the 40% that’s unavailable is critical functionality, the customer may argue that the partial suspension is effectively a material breach regardless of the force majeure invocation. If the 60% delivered is substantially all the customer needs, the customer may not have grounds for termination based on the partial suspension.
Practical Negotiating and Drafting Guidance
When negotiating force majeure termination provisions, consider the specific operational context of each major contract. For contracts where you’re the customer, you generally want: a shorter duration threshold before you can terminate; a broad termination right that applies to both total and material partial force majeure; and clear provisions for refund of prepaid amounts on termination. For contracts where you’re the vendor, you generally want: a longer threshold before either party can terminate; a right to cure even after the threshold by resuming performance within the notice period; and limiting prepayment or advance payment structures that would require large refunds on termination.
Include specific provisions for what happens to in-progress work on termination. Software development, construction, consulting engagements, and other service contracts often have deliverables that are partially completed when force majeure termination occurs. The contract should address who owns the work in progress, whether and how the vendor is compensated for completed but not delivered work, and what transition assistance the vendor must provide to allow the customer to complete the work with an alternative provider.
Don’t overlook the relationship between force majeure termination and other termination provisions in the contract. If the contract has a termination for convenience provision, the interplay between convenience termination and force majeure termination should be clear. If the contract has payment obligations that survive termination (like post-termination royalties, earn-outs, or retention amounts), the force majeure termination provisions should address whether those obligations survive a force majeure termination in the same way they survive a termination for other reasons.