Force Majeure Clauses in Australia: What To Know

When business is running smoothly, contracts feel straightforward. But unexpected disruptions happen - floods, supply chain shocks, cyber incidents, strikes, or a pandemic-level event. That’s where a force majeure clause can help manage risk and give you a clear process if circumstances beyond your control derail performance.

In this guide, we’ll unpack what force majeure is, when it applies in Australia, what to include (and avoid) in your clause, and practical steps to take if a force majeure event hits your business. The goal is to help you negotiate fair, workable terms with suppliers, customers and partners, and reduce the chances of costly disputes.

What Is Force Majeure In Australian Contracts?

Force majeure is a contractual clause that excuses or delays a party’s obligations when extraordinary events outside their control make performance impossible or impracticable. Think of it as an agreed “release valve” for extreme scenarios, not a shortcut for routine commercial problems.

Importantly, under Australian law, force majeure is not a general legal right - it only applies if it’s included in your contract. The clause has to define what a “force majeure event” is, explain what happens to each party’s obligations during that event, and set out a process (like notice requirements and mitigation steps).

Without a force majeure clause, you’re left with common law doctrines like frustration, which are much narrower and harder to prove. A well-drafted clause gives you clarity and a practical pathway to manage disruption.

Are Force Majeure Clauses Enforceable In Australia?

Yes - courts will generally enforce a clear force majeure clause according to its wording. That’s why the definition, notice procedure and consequences section matter so much. Courts won’t “fill in the gaps” or read the clause generously if it’s vague.

Here are the big principles to keep in mind:

• Force majeure is interpreted strictly. If an event isn’t covered by the definition, or you don’t follow the clause’s process, you may miss the protection.
• You normally must show the event was beyond your reasonable control and that it prevented or seriously hindered performance (mere difficulty or higher cost is often not enough unless your contract says so).
• You’re expected to mitigate - i.e. take reasonable steps to avoid or reduce the impact.
• Consumer and small business unfair contract term laws can apply to force majeure provisions, particularly in standard form contracts. If your clause is one‑sided or too broad, it may be at risk, so it’s wise to consider a practical UCT review.

Force majeure also interacts with other risk allocation provisions. For example, a balanced force majeure clause should work alongside a fair limitation of liability and indemnity structure so you’re not left exposed while performance is paused.

Which Events Should (And Shouldn’t) Count As Force Majeure?

Your definition of “force majeure event” is the engine room of the clause. Too narrow, and you get no protection; too broad, and you risk disputes or unfair contract term issues. A practical approach is a combination of general wording plus a sensible (non-exhaustive) list of examples.

Common Force Majeure Events

• Natural disasters and extreme weather (flood, bushfire, cyclone, earthquake)
• Pandemics, epidemics and government-imposed restrictions or lockdowns
• War, terrorism, civil unrest, riots or embargoes
• Industrial action not caused by the affected party (e.g. third-party strikes)
• Government actions, new laws or regulatory orders that prevent performance
• Widespread utility failures (power, water, communications) or critical infrastructure failure
• Major supply chain disruptions that are outside the party’s reasonable control

Typical Carve-Outs (What Usually Doesn’t Count)

• Events within a party’s control (e.g. unavailability of your own staff if you could have planned resourcing)
• Foreseeable issues you can reasonably plan around (e.g. seasonal demand, ordinary price fluctuations)
• Financial hardship or changes in market conditions alone (unless expressly included)
• Delays by subcontractors you’ve chosen where alternatives were reasonably available

To reduce ambiguity, avoid catch-all language like “any other event” without context. If an event is important to your business (for example, reliance on a specific port or data centre), include it expressly so there’s no argument later.

How Should You Draft Or Negotiate A Force Majeure Clause?

Well-drafted force majeure terms set expectations, reduce disputes, and keep relationships intact when things go sideways. Here’s a practical checklist you can tailor to your contracts.

1) Define The Events Clearly

Use a plain-English definition of a force majeure event, then add a non-exhaustive list of examples that reflect your real risks. Keep the list current - we’ve learned a lot since 2020 about pandemics, government restrictions and systemic supply chain disruption.

2) Clarify The Threshold

Decide whether the event must “prevent,” “hinder,” or “delay” performance. “Prevent” is a higher bar than “hinder.” If you’re the supplier, you might prefer “prevent or materially hinder,” while a customer may push for “prevent” only.

3) Notice And Evidence

Set out a simple notice process: when notice must be given (e.g. within X days), what it must include (details of the event and impact), and any supporting evidence. Make the timing realistic so genuine claims aren’t tripped up by admin.

4) Mitigation Obligations

Both sides should commit to taking reasonable steps to avoid or lessen the impact - for example, switching freight routes, using substitute materials, or re-sequencing tasks. If you can, include examples of acceptable substitutes to prevent debates later.

5) Consequences: Suspension, Extensions And Termination

Spell out what happens to obligations while the event continues. Typical options include:

• Suspension of affected obligations for the duration of the event
• Automatic extension of time for delivery or milestones
• Right for either party to terminate without penalty if the event continues beyond a defined period (e.g. 30-90 days)
• Payment adjustments or refunds for undelivered goods/services (especially in prepaid arrangements)

These choices should align with the commercial reality of your arrangement and the broader risk framework in your agreement. If you’re putting a new deal together, consider a streamlined Contract Review to ensure the force majeure clause connects sensibly with timelines, payments, service levels and termination rights across the contract.

6) Interplay With Other Clauses

Force majeure doesn’t live in a vacuum. Check how it interacts with liquidated damages, service levels, change control, indemnities and your limitation of liability. A fair balance reduces the chance of a dispute or an unfair contract term allegation.

7) Keep It Compliant And Balanced

If you use standard form contracts with consumers or small businesses, ensure your force majeure terms aren’t one‑sided. A balanced clause that applies to both parties and uses clear, reasonable language is more likely to hold up under the Australian Consumer Law’s unfair contract term rules. If in doubt, a focused UCT review and redraft can help future-proof your templates.

8) Put Changes In Writing

When trade conditions shift, you may need to tweak timelines or performance requirements. If the parties agree on adjustments, formalise them through a short variation so there’s no confusion. You can learn more about making amendments to contracts and, if appropriate, using a deed or letter to lock in the change.

For bespoke wording or a complex risk profile, it’s often faster and safer to get targeted help with clause drafting so your force majeure terms fit the rest of your agreement.

What To Do When A Force Majeure Event Hits Your Business

If you think a force majeure event has occurred, act quickly but calmly. Small, timely steps can protect your rights and relationships.

Step 1: Review The Contract

Confirm the clause applies to your situation. Check the definition, notice deadlines, mitigation requirements, and any time limits before termination kicks in. If you have multiple contracts affected, triage the most time‑critical ones first.

Step 2: Notify The Other Party

Give written notice as required by the contract. Include brief facts about the event, how it affects performance, what you’re doing to mitigate, and when you’ll provide an update. Even if you don’t have every detail on day one, timely notice preserves your position.

Step 3: Mitigate And Document

Take reasonable steps to reduce the impact (alternate suppliers, different routes, substitute inputs, revised schedules). Keep records - emails to suppliers, quotes, incident reports, government announcements. Good records support your position if there’s a dispute.

Step 4: Collaborate On A Workable Plan

Work with your customer or supplier to agree extensions, partial deliveries, temporary service level adjustments, or refunds/credits if needed. If you agree variations, document them (even a short email trail followed by a formal variation can help). A simple variation can be formalised using a deed of variation or similar instrument - if the matter is sensitive, consider a Deed of Settlement to capture broader commercial resolution.

Step 5: Escalate If Necessary

Sometimes collaboration isn’t possible. If a dispute arises, review your dispute resolution clause, consider mediation, and seek advice early. Where a party refuses to perform without a valid force majeure claim, you may have breach of contract options - but weigh up the commercial relationship and evidence before escalating.

Supplier Or Customer? Practical Negotiation Tips

If You’re The Supplier

• Push for “prevent or materially hinder” as the threshold - it gives you room to deal with serious disruptions short of impossibility.
• Include examples tailored to your operations (e.g. port closures, key raw material shortages, critical SaaS outages beyond your control).
• Seek automatic extensions of time and a reasonable long-stop before a customer can terminate.
• Align service credits or liquidated damages so they’re paused during a valid force majeure period.

If You’re The Customer

• Prefer a higher threshold like “prevent,” and require clear evidence and ongoing updates.
• Include carve-outs for foreseeable events and for supplier-caused issues (e.g. their own staffing or financial problems).
• Set a reasonable cap on extensions and a clear right to terminate and source elsewhere if disruption continues.
• Ensure prepaid amounts for undelivered goods/services are refundable or credited if the contract ends due to prolonged force majeure.

Both sides benefit from clarity around payments, service levels and data protection during a force majeure period. Where services are critical, consider a step-in or contingency plan in parallel with your force majeure clause.

Key Takeaways

• Force majeure is a contract tool - not a general legal right - so clear wording is essential if you want protection in Australia.
• Define “force majeure event” carefully, include realistic examples and sensible carve-outs, and set a straightforward process for notice, mitigation and updates.
• Agree what happens during disruption: suspension, time extensions, payment adjustments, and termination rights after a long-stop period.
• Keep the clause balanced and consistent with unfair contract term laws, especially in standard form agreements used with small businesses or consumers.
• When disruption hits, act fast: check the clause, give notice, mitigate, document your steps, and consider a short written variation or a formal deed if needed.
• It’s smart to align force majeure with related terms like your limitation of liability, service levels and change control, ideally via a concise Contract Review or tailored clause drafting.

If you’d like a consultation on drafting, reviewing or updating force majeure clauses for your contracts, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.