Force Majeure Clauses in Australia: What They Mean and When They Apply

When you’re running a small business or startup, it can feel like your to-do list is already endless - customers, suppliers, cash flow, hiring, product development, marketing. The last thing you want is a major, unexpected event that disrupts operations and puts you in breach of contract.

That’s where a force majeure clause can make a real difference. In plain English, it’s a contract clause that can help manage what happens if something outside your control stops you (or the other party) from fulfilling your obligations.

But in Australia, you can’t assume you’re automatically “covered” just because something big happens. Force majeure isn’t a universal right - it depends on what your contract actually says.

Below, we’ll break down how force majeure clauses in Australia typically work in commercial contracts, what to look out for as a small business owner, and how to draft terms that genuinely protect your business (instead of giving you a false sense of security).

What Is A Force Majeure Clause In Australia?

A force majeure clause is a contract term that sets out what happens if an unexpected event (usually outside the parties’ control) prevents one or both parties from performing their obligations.

In a practical sense, force majeure clauses often aim to:

• Excuse a delay or non-performance (temporarily or sometimes permanently);
• Pause obligations for a period (sometimes called “suspension”);
• Trigger notice requirements (for example, requiring written notice within a certain number of days);
• Allow termination if the event lasts too long.

In Australia, force majeure is generally not implied automatically into contracts. That means if your agreement doesn’t contain a force majeure clause (or contains a very narrow one), you may not be able to rely on it.

It’s also worth keeping in mind that a “force majeure event” isn’t a single defined thing across all contracts. The clause usually works by listing specific events (and sometimes also includes a broader “catch-all” category).

Why This Matters For Small Businesses And Startups

Startups and small businesses often operate on tight margins. A delayed shipment, a sudden closure order, or a supplier shutdown can have a fast domino effect - missed customer deadlines, refund requests, reputational harm, and lost revenue.

A well-drafted force majeure clause can help you manage these risks by setting clear rules for what happens if a genuine “outside your control” event hits your business.

When Can You Rely On A Force Majeure Clause?

Whether you can rely on a force majeure clause in Australia depends on the exact drafting and the facts of what happened. Even if an event feels like “force majeure” in everyday language, that doesn’t mean it fits the clause in your contract.

Most force majeure clauses involve a few key moving parts:

1) Is The Event Actually Covered By The Clause?

Some clauses list specific examples, like:

• natural disasters (floods, bushfires, earthquakes)
• pandemics or epidemics
• government actions (lockdowns, border closures, import/export bans)
• war, riots, terrorism
• strikes or industrial action
• utility failures or supply chain disruption (sometimes included, sometimes not)

If the event is not included (or doesn’t fit the wording), you may not be able to rely on it.

2) Did The Event Prevent Performance (Or Just Make It Harder/More Expensive)?

Many clauses require that performance is prevented, not merely made more difficult or expensive.

For example, if your supplier’s costs doubled due to international freight issues, that may feel catastrophic - but if delivery was still possible, your clause may not apply unless it expressly covers that scenario (or uses broader language like “hinders” or “delays”).

3) Did You Take Reasonable Steps To Mitigate?

Force majeure clauses often require the affected party to take reasonable steps to reduce the impact - for example, sourcing alternate suppliers, using substitute materials (if permitted), or changing delivery timelines where possible.

If you do nothing and simply stop performing, you may lose the protection of the clause.

4) Did You Follow The Notice Requirements?

It’s common for force majeure clauses to require:

• prompt written notice of the event
• details of how performance is affected
• regular updates

Missed notices can create disputes, even if the underlying event is legitimate. As a small business owner, it’s a good idea to treat notice requirements like a “must-do” checklist item, not an optional extra.

Common Force Majeure Events: What Counts (And What Usually Doesn’t)?

One of the biggest pain points we see is that business owners assume “force majeure” includes any unexpected disruption. In reality, disputes about force majeure clauses in Australia often come down to the fine print.

Events Commonly Included

• Natural disasters: floods, storms, bushfires and earthquakes are often included because they’re clearly outside the parties’ control.
• Government action: changes in law, lockdown orders, border closures, and permit suspensions may be included.
• War and civil unrest: war, terrorism, riots, sabotage and similar events.
• Public health emergencies: pandemics/epidemics may be included (many businesses updated clauses after COVID-19).

Events That Are Often Not Covered (Unless Drafted In)

• Cash flow problems: “We can’t pay because business is slow” usually isn’t force majeure.
• Supplier issues (in some contracts): if your supplier fails, that may be treated as your commercial risk unless your clause covers supply chain disruption.
• Equipment breakdown: often treated as something you must maintain/manage, unless tied to broader events (like widespread power failure).
• Foreseeable risks: depending on the wording, some clauses exclude events that were reasonably foreseeable or already occurring when the contract was signed - but others don’t, so it’s a drafting (and evidence) issue rather than a universal rule.

Because the coverage varies so much, force majeure clauses should be drafted to match your business model. A software business, a manufacturer, a retailer, and a professional services firm all face different “outside the control” risks.

How Force Majeure Clauses Affect Your Contracts (Customers, Suppliers, Leases And Partnerships)

Force majeure clauses aren’t “one size fits all”. Where they appear (and how they should be drafted) depends on what contracts keep your business running.

Customer Contracts And Terms Of Sale

If you provide services or deliver goods, force majeure can be crucial for:

• delivery delays
• service interruptions
• event cancellations
• supply shortages

Your customer terms can also intersect with your obligations under the Australian Consumer Law (ACL). Even if your force majeure clause gives you rights to delay or cancel, you still need to be careful about how you communicate delays, refunds, replacements, and cancellations.

It’s also important that your overall terms are enforceable and clear - including how fees, refunds and cancellation rights work. If your business uses cancellation policies, you may want to align them with cancellation fees principles under the ACL.

Supplier And Manufacturing Agreements

Suppliers will often include force majeure clauses to protect themselves. As a customer of a supplier, you’ll want to check whether the clause:

• gives them too much discretion to delay indefinitely
• requires them to mitigate and propose alternatives
• allows you to terminate if delays exceed a certain time
• requires prompt notice and evidence

If your business depends on one critical supplier, this is an area where careful contract drafting can genuinely reduce existential risk.

Commercial Leases

Many small businesses assume force majeure automatically reduces rent if they can’t trade. In practice, commercial leases can be complex, and many lease documents don’t provide broad “rent relief” just because something unexpected happens.

Whether you have any relief may depend on the lease wording, any negotiated arrangements, and in some cases specific legislation or mandatory codes that apply in certain circumstances. If you’re negotiating a new lease or renewing, it’s worth having the agreement reviewed so you understand what happens in disruption scenarios and what rights you actually have.

Partnerships And Founder Arrangements

Force majeure issues aren’t just external - they can also impact co-founders if the business can’t operate as planned and needs rapid decision-making.

If you have co-founders, clear decision-making and dispute resolution processes (and who can commit the business to key decisions) are critical in high-pressure events.

What Should A Good Force Majeure Clause Include?

If you’re drafting or reviewing a force majeure clause, it’s worth thinking beyond just listing disasters. A strong clause sets out what happens next, in a way that’s commercially realistic for your business.

Here are the key elements we typically look for when helping small businesses and startups:

Clear Definition Of A Force Majeure Event

Many clauses use a combination of:

• a list of specific events (e.g. natural disaster, government action), and
• a general statement like “any event beyond a party’s reasonable control”.

The more your clause relies on vague words alone, the more likely you’ll end up in a dispute about what was “beyond reasonable control”. A tailored list can help reduce arguments.

Trigger Threshold: “Prevent”, “Hinder”, Or “Delay”?

These words matter, and what they mean will ultimately depend on the drafting and how the clause operates in context.

• Prevent is commonly used to set a higher bar (closer to “can’t perform”).
• Hinder or impede may capture a wider range of disruption, depending on how the clause is framed.
• Delay often focuses on time impact and may be useful where the contract is delivery or milestone-driven.

If your business is exposed to supply chain disruption, you may want drafting that clearly addresses disruption and delay (not just total impossibility).

Notice Requirements And Evidence

A good clause usually sets out:

• when notice must be given
• what notice must contain
• what proof is required (if any)

This helps keep things objective. It also protects you if the other party tries to use “force majeure” as a convenient excuse.

Mitigation Obligations

Most well-balanced clauses require reasonable mitigation. This can include:

• using alternative providers/suppliers
• re-routing delivery
• providing substitute performance (where acceptable)
• rescheduling within a certain timeframe

For small businesses, “reasonable” is important - you don’t want to agree to mitigation obligations that are unrealistic or financially impossible.

What Happens To Payments?

A major commercial pressure point is whether payment obligations are suspended.

Some clauses:

• suspend both parties’ performance (including payment), or
• suspend only the affected party’s performance (meaning the other side may still need to pay), or
• say payment is still due, even if performance is delayed.

There isn’t one “right” approach - but it needs to be deliberate and aligned with your cash flow risk.

Termination Rights If The Event Continues

Many clauses allow termination if the force majeure event continues beyond a defined period (e.g. 30, 60, or 90 days).

This can protect both sides from being stuck in an agreement that no longer makes commercial sense.

Interaction With Other Clauses

Force majeure clauses can overlap with (or be undermined by) other contract terms, including:

• limitation of liability clauses
• payment terms
• termination for convenience or for breach
• change control or variation clauses

If you’re updating templates, it’s worth ensuring the entire contract works together. For example, if you use limitation of liability clauses, they should be consistent with how you allocate risk around unexpected events. (This is a common reason businesses ask for help with limitation of liability clauses.)

Practical Tips For Small Businesses Negotiating Force Majeure Clauses

Negotiation doesn’t have to mean a tense back-and-forth. In many cases, it’s simply about making sure your contract reflects reality - especially if you’re a startup working with larger suppliers or enterprise customers.

Tip 1: Identify Your Biggest “Outside Control” Risks

Before you edit a clause, step back and ask:

• What would actually stop us from delivering?
• What parts of our supply chain are fragile?
• Are we dependent on one platform, one manufacturer, or one logistics route?
• What’s the biggest operational risk in the next 12 months?

This helps you draft something meaningful rather than generic.

Tip 2: Avoid Clauses That Let The Other Party “Opt Out” Too Easily

Some force majeure clauses are drafted very broadly and can effectively allow a party to delay performance with minimal accountability.

If you’re the smaller party, watch out for clauses that:

• don’t require mitigation
• don’t require evidence
• allow indefinite suspension with no termination right for you
• allow a party to claim force majeure for events within their control (like avoidable staffing or resourcing issues not caused by an external event)

Tip 3: Build In Communication Requirements

In disruption events, silence is what causes disputes.

Regular update obligations (e.g. weekly updates while the event continues) are often commercially helpful and reduce the likelihood of a relationship breakdown.

Tip 4: Make Sure Your Contracts Match Your Business Model

If you sell online, your terms should reflect online realities - shipping delays, third-party delivery issues, inventory shortages, and customer expectations.

If your website collects personal data (which is common even for simple lead forms), your legal foundation should also include a Privacy Policy, because disruption scenarios can also lead to operational changes that impact how you handle customer communications and data.

Tip 5: Use The Right Contract Documents (Not Just A Clause)

Force majeure is one tool. Many businesses get better protection by combining it with the right agreements and terms overall, such as:

• Customer terms: clear service scope, timeframes, payment, cancellations, and dispute handling
• Supplier agreements: delivery commitments, alternative sourcing, quality standards, and remedies
• Deed of variation: a structured way to agree changes when circumstances shift

When you’re changing an existing contract because circumstances have changed, it’s important to do it correctly (and in writing). This is where a properly drafted Deed of Variation can help you document changes without creating confusion about what still applies.

Tip 6: Don’t Forget Your Internal Operations (People And Policies)

If you have staff, disruption events can affect rostering, stand-downs, remote work, and business continuity.

Having the right documentation in place makes these moments easier to manage. For example, a properly drafted Employment Contract helps set expectations and processes if work needs to shift temporarily.

Key Takeaways

• A force majeure clause can protect your business when unexpected events outside your control disrupt performance, but it only works if it’s actually included (and drafted well) in your contract.
• In Australia, force majeure rights are generally contractual, so the wording of your clause will usually determine whether you can rely on it.
• Good force majeure clauses define what events are covered, set the threshold for impact, require notice and mitigation, and clarify what happens to payments and termination rights.
• Small businesses should be careful with broad clauses that allow the other party to suspend performance indefinitely without transparency or an end date.
• Force majeure clauses work best when aligned with your broader contracts and legal documents (customer terms, supplier agreements, privacy compliance, and employment documentation).

If you’d like help drafting or reviewing a force majeure clause for your small business or startup, you can reach Sprintlaw at 1800 730 617 or team@sprintlaw.com.au.