Supply chain disruptions expose buyers to a double-sided force majeure problem. On one side, your suppliers invoke force majeure to excuse their non-delivery, leaving you without goods or materials you need to operate. On the other side, your customers expect performance from you regardless of what your suppliers are doing, and your force majeure protection may or may not extend to cover a supplier-caused failure. Navigating both dimensions requires understanding how force majeure doctrine applies to supply chains specifically, and how to use contract drafting to protect your position before disruptions occur.
Supply chain force majeure has been at the center of commercial litigation following the COVID-19 pandemic, the disruptions to global shipping in 2021 and 2022, and geopolitical events affecting material supplies. The cases that emerged from these events provide important guidance about when force majeure protects buyers, when it doesn’t, and what buyers should do differently in their contracts and operations. This article addresses both the legal doctrine and the practical contract strategy for buyers who depend on supply chains.
When Suppliers Invoke Force Majeure Against You
When a supplier invokes force majeure to excuse non-delivery, your first obligation is to evaluate whether the invocation is valid under your supply agreement. This means reviewing the force majeure clause in your contract with the supplier and asking: Does the event the supplier cites actually qualify under the specific triggering event language in the contract? Has the event made delivery impossible or materially hindered it, as the contract requires? Did the supplier provide timely notice as the contract requires? Is the supplier using commercially reasonable efforts to mitigate the impact and resume delivery? If any of these elements is missing, the supplier’s force majeure invocation may be ineffective.
Scrutinizing force majeure invocations is particularly important because force majeure is sometimes invoked opportunistically — to escape a contract that has become economically unfavorable to the supplier rather than because performance is genuinely impossible. A supplier who is facing rising production costs, who has found a higher-paying buyer for constrained inventory, or who wants to exit a contract relationship may cite force majeure as a justification even when the legal elements haven’t been met. Careful evaluation of the actual facts, the supply chain conditions, and what alternative suppliers are doing in the same market helps identify whether the force majeure claim is genuine.
Request documentation. When a supplier invokes force majeure, ask for evidence supporting the claim: documentation of the specific qualifying event, evidence of how it has prevented or materially hindered performance, description of mitigation efforts and why those efforts haven’t restored supply, and an assessment of expected duration. Legitimate force majeure events generate documentation — government orders, disaster declarations, media coverage, industry notices. A supplier who cannot or will not provide supporting documentation is a supplier whose force majeure claim deserves additional scrutiny.
Understand your rights during the supplier’s claimed force majeure period. Most supply contracts allow the buyer to source from alternative suppliers when the primary supplier invokes force majeure, without that alternative sourcing constituting a breach or waiver of the buyer’s rights against the primary supplier. Make sure you exercise this right promptly to avoid supply gaps, and document that the alternative sourcing was undertaken because of the supplier’s force majeure invocation rather than as a voluntary choice. If the force majeure ultimately proves invalid, you want a clear record that your alternative sourcing was a mitigation measure, not a termination of the primary relationship.
Your Own Force Majeure Position as a Buyer
When a supplier fails to deliver because of force majeure, you face the question of whether you can invoke force majeure under your downstream contracts with customers. The answer typically depends on whether the supply disruption qualifies as a force majeure event under the specific language of your customer contracts, and on whether the supplier’s force majeure event was foreseeable at the time you made commitments to your customers.
Courts have generally required that force majeure in supply chain contexts meet the same standard as in any other context: the qualifying event must be the specific, direct cause of the performance failure; the event must have been unforeseeable at the time the downstream commitment was made; and the party invoking force majeure must have taken reasonable steps to procure alternative supply before claiming they couldn’t perform. A buyer who could have obtained alternative supply but didn’t try, or who made commitments to customers knowing the supply chain was fragile, typically cannot invoke force majeure based on a supplier’s failure.
The foreseeability question is critical for supply chain force majeure claims. If you entered customer contracts during a period of known supply chain stress — as many businesses did during 2021 and 2022 — and promised delivery without building in force majeure protection for supply disruptions, courts may hold that you assumed the supply chain risk. A prudent buyer operating in a volatile supply environment who makes firm delivery commitments to customers without force majeure protection has arguably allocated the supply chain risk to themselves by the act of making those commitments.
The right approach for buyers who depend on supply chains is to structure their customer contracts to flow through the force majeure protection from their supply agreements. This means including supply chain disruptions as an enumerated force majeure event in customer contracts, specifying that the buyer’s force majeure protection includes disruptions to its supply chain caused by events that would qualify as force majeure under applicable supply agreements, and providing notice rights that allow the buyer to alert customers promptly when a supply chain force majeure event occurs. This flow-through approach is less clean than a simple alignment of force majeure provisions across tiers, but it’s more protective than making customer commitments without any supply chain protection.
Drafting Supply Agreements with Better Force Majeure Protection
As a buyer, your supply agreements should include specific force majeure provisions that address the supply chain scenarios most relevant to your business. Generic force majeure clauses designed for service agreements may not capture the specific disruptions that affect goods supply chains. Consider which of the following should be addressed expressly in your supply agreements: factory shutdowns (both at the supplier and in the supplier’s own supply chain); transportation and logistics failures including port closures, carrier failures, and infrastructure disruptions; government export controls, sanctions, or trade restrictions affecting specific goods or countries of origin; natural disasters affecting specific production regions; and labor actions at suppliers, logistics providers, or transportation infrastructure.
Include supply allocation provisions in your agreements with critical suppliers. When a supplier faces constrained inventory or production capacity due to a force majeure event, how will they allocate available supply among their customers? Without a contractual allocation provision, the supplier has discretion to prioritize customers based on commercial relationships, price, or volume. An allocation provision that requires the supplier to allocate proportionally based on historical orders or to give priority to orders for specific critical goods gives you more protection when supply is constrained.
Build in advance notice obligations that are triggered before a full force majeure event occurs. Suppliers who are experiencing developing supply problems — anticipating factory closures, seeing inventory drawdown, receiving early warning from their own suppliers — should be obligated to notify you as soon as they reasonably anticipate that performance may be affected. Early warning allows you to begin contingency planning, activate alternative suppliers, and adjust your own commitments to customers. A force majeure provision that only requires notice after performance has already failed provides much less practical value than one that requires early warning of anticipated problems.
Consider requiring business continuity and disaster recovery plans from critical suppliers. A supplier who has thought through their supply chain vulnerabilities, identified alternative sources of inputs, and prepared operational contingency plans is more likely to maintain supply through disruptions than one operating without such planning. Making business continuity planning a contractual requirement for critical suppliers — and reserving the right to audit those plans — shifts some of the mitigation obligation to the supplier before any force majeure event occurs.
Diversification and Contractual Alternatives to Force Majeure
The most effective supply chain protection strategy is one that reduces your dependence on a single supplier to the point where a single supplier’s force majeure event doesn’t create a critical disruption. Supply chain diversification — maintaining relationships with multiple qualified suppliers for critical goods, sourcing from geographically diverse locations, carrying safety stock for key inputs — is more reliable protection than any contractual force majeure provision.
Contractual options alongside force majeure provisions can also provide supply chain protection. Backup supplier agreements — contracts with secondary suppliers at predetermined pricing that activate when the primary supplier can’t deliver — limit the impact of any single supplier’s force majeure event. Material availability guarantees, where the supplier commits to maintaining minimum inventory reserves for your account, reduce the risk of supply gaps even when overall market supply is constrained. These provisions work alongside force majeure clauses rather than instead of them, creating a more comprehensive risk management framework.
Fixed-price commitments from suppliers also intersect with force majeure in important ways. When commodity prices spike, suppliers sometimes invoke force majeure to escape fixed-price commitments rather than because performance is genuinely impossible. Your supply agreements should make clear that economic changes — including commodity price increases — do not qualify as force majeure events. The force majeure clause should expressly exclude increased costs, changed market conditions, and loss of profitability as qualifying events, ensuring that the clause is available only for genuine operational disruptions rather than economic renegotiation attempts.
What to Do When Supply Chain Force Majeure Materializes
When a supply chain force majeure event occurs, act quickly on multiple fronts simultaneously. First, evaluate and respond to any force majeure notice from your supplier — accepting it provisionally while reserving the right to challenge it, or challenging it with specific objections, depending on your assessment of its validity. Second, activate alternative supply relationships and begin sourcing from backup suppliers to limit the operational impact while the primary supply situation is resolved. Third, send appropriate force majeure notice to your downstream customers if the supply disruption qualifies under your customer contracts, following the notice procedures in those agreements.
Document everything. Supply chain force majeure situations often involve disputes that extend months or years after the initial disruption. A contemporaneous record of when the supplier notified you, what you did to find alternative supply, what you communicated to customers, and how costs were incurred and allocated will be essential in any subsequent dispute. Force majeure situations that are well-documented from the beginning are much easier to resolve fairly than situations where the parties are reconstructing events from memory well after the fact.