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  • Writer's pictureStephen H Akin

Force Majeure

In business circles, "force majeure" describes those uncontrollable events (such as war, labor stoppages, or extreme weather) that are not the fault of any party and that make it difficult or impossible to carry out normal business.

A company may insert a force majeure clause into a contract to absolve itself from liability in the event it cannot fulfill the terms of a contract (or if attempting to do so will result in loss or damage of goods) for reasons beyond its control.

Watching the news tape we see more and more uses of the the term "force majeure"

Understanding Force Majeure

Force majeure is a French term that literally means "greater force." It is related to the concept of an act of God, an event for which no party can be held accountable, such as a hurricane or a tornado. Force majeure also encompasses human actions, however, such as armed conflict. Generally speaking, for events to constitute force majeure, they must be unforeseeable, external to the parties of the contract, and unavoidable. These concepts are defined and applied differently depending on the jurisdiction.

The concept of force majeure originated in French civil law and is an accepted standard in many jurisdictions that derive their legal systems from the Napoleonic Code. In common law systems, such as those of the United States and the United Kingdom, force majeure clauses are acceptable but must be more explicit about the events that would trigger the clause.

A recent article in WIRED Magazine said: Russia’s War in Ukraine Could Spur Another Global Chip Shortage

  • Ukraine is home to half of the world's neon gas, which is critical for manufacturing semiconductor chips.

On the chip subject NASDAQ stocks continue under pressure as they have been for months.

Financial stocks are another area of concern.

"Counter Party Risk" the term that gained popularity in the days of the "Lehman failure" is back in a major way.

The largest exposure to the Russian financial markets is Citigroup here in the United States.

10:00 am Tomorrow Federal Reserve Chairman Jerome Powell will deliver the Semiannual Monetary Policy Report to the Congress Before the Committee on Financial Services, U.S. House of Representatives.

Commodities too are subject to dealing with "Force Majeure" issues.

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