Disclaimer: The information in this update is current as at 26 March 2026. 

With conflict and restrictions in the Strait of Hormuz, businesses are again seeing how quickly supply chains can be disrupted without much forewarning. When supply or contract performance is heavily affected or becomes impossible, it is inevitable that commercial parties will look to their supply contracts to understand what their obligations are and look for ways of seeking relief. Suppliers may look for clauses which permit the slowing of delivery times or suspending supply for a brief period. Customers may look to terminate contracts or slow payment if supply is affected.

In times of conflict, "force majeure" clauses can often provide relief and set out rules for trading during uncertain times.

“Force majeure” is a French term translating to “superior strength”. However, the Oxford English Dictionary gives a legal definition as being “unforeseeable circumstances that prevent someone from fulfilling a contract”. Though not exhaustive, typical examples of a “force majeure event” include:

• acts of god;

• natural disasters (bushfire, flood, storm and tempest);

• war, terrorism, blockade or insurrection;

• strikes, riots and civil disturbance; and

• epidemic or pandemic.

There is no doctrine in English law which corresponds with the doctrine of "force majeure" in French law. In Australia, “force majeure” is a commercial concept that applies only if a contract has a clause that provides for it. If the contract does not have such a clause, "force majeure" is not otherwise available, whether in statute, at law or in equity.

Further, "force majeure" is not to be confused with the common law contract doctrine of frustration, which is a matter of law.

Accordingly, a “force majeure” clause is a matter the parties can choose to address in the contract and can be tailored to the needs of the relevant commercial parties, usually suppliers and customers. If a dispute in respect of such a clause arises, ultimately, courts will rely on the contract wording to determine the matter.

The purpose of a “force majeure” clause is to provide relief from performance where unavoidable events occur. Exactly how a “force majeure” clause works depends on the wording of the “force majeure” clause, but typically the affected party must show that the event:

• was irresistible;

• was unforeseeable;

• was external to the person claiming discharge; and

• made performance impossible.

Increased cost of performance is usually not a category of "force majeure" that relieves a party from the consequences of non-performance.    

A well drafted “force majeure” clause will clearly define the events that trigger the clause in the context of the commercial relationship, take into consideration the events that may affect supply and set out what happens next. This may include notice requirements, ongoing reporting, mitigation steps, suspension of obligations and when either party can terminate if the disruption goes on too long.

Parties should also be considering supply chain cost increases, adverse exchange rate variations, increases in any direct or indirect tax, duty or tariff (other than taxes on income, profits or turnover) and circumstances which make performance in the normal way and in the normal time, impracticable or materially more expensive.

If you are, or think you could be, exposed to supply chain disruption or have a commercial relationship affected by current affairs, now is a good time to review your relevant contracts. In particular, check:

• whether the contract has a “force majeure” clause (and how a “force majeure event” is defined);

• whether the clause applies only when performance is slowed, impossible or when it is delayed;

• what notice must be given (timings, in what form and what evidence in support is required);

• what you must do to reduce the impact (for example, source alternatives, re‑sequence delivery or allocate stock); and

• whether obligations are suspended, whether payment dates are extended and when either party can terminate if the event continues.

If you think you might be impacted by a “force majeure event”, our Corporate & Commercial team is available to provide you with expert advice, tailored to your needs.