Who Pays When a Volcano Grounds the Flights? Read the Clause
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A clause excusing performance when something extraordinary intervenes is one of the most negotiated paragraphs in commercial contracts, and it does far less than most people assume.
What the clause does
The provision identifies events outside the control of the parties which, if they occur, suspend or excuse an obligation to perform without that failure counting as a breach. Without such a clause the general position in common law systems is strict, meaning a party who has promised to do something is liable if they do not, however good the reason. The clause is therefore a negotiated departure from that harshness, and because it is negotiated its scope depends entirely on the words used rather than on any general principle about unfairness.
What is usually listed
Drafters name specific categories rather than relying on a general phrase:
- •War, terrorism, civil unrest and government action
- •Natural events including flood, earthquake and storm
- •Fire and explosion, whether or not anyone was at fault
- •Epidemic and quarantine restriction, now always included
- •Strikes and labour disputes, sometimes excluding the party's own
- •A sweeping phrase at the end, which courts read narrowly
Why it is narrower than it sounds
The common disappointment is discovering that an obviously extraordinary event does not trigger the clause. Courts in common law systems interpret these provisions strictly, and the general catch-all phrase at the end is usually read as limited to things of the same kind as those already listed, so an unlisted category may fall outside. The event normally has to make performance impossible rather than merely expensive or unprofitable, and a rise in costs however severe is generally not enough. The party relying on it must show causation, must usually show it took reasonable steps to mitigate, and often must give notice within a stated period.
What the pandemic taught drafters
The events of 2020 produced a wave of disputes that changed how these clauses are written. Many contracts listed epidemic or disease and many did not, and whether a government order closing a business counted as government action was litigated repeatedly. The lesson taken by commercial lawyers was that the specific list matters far more than the general words, and modern drafts now routinely name epidemics, pandemics, quarantine, supply chain failure and cyber incidents explicitly. Clauses also increasingly distinguish between suspension and termination, and set out who bears costs during a suspension, which older drafts frequently left silent.
The doctrines behind it
Where no clause exists, other rules may help and they are far more limited. Common law recognises that a contract can be discharged where an unforeseen event destroys the basis of the bargain entirely, which is a demanding test that fails wherever performance is merely harder. Civil law systems have broader statutory doctrines, and some allow a court to adjust the terms rather than only to cancel, which common law generally will not do. That difference is one of the practical reasons international contracts specify their governing law carefully, since the same event and the same words can produce different outcomes.
The takeaway
The clause is a negotiated exception to strict liability for non-performance, listing specific extraordinary events that suspend or excuse an obligation. Courts read it narrowly, limit the catch-all phrase to things like those listed, and usually require impossibility rather than expense. Without such a clause, the fallback doctrines are demanding, and civil law systems allow adjustment where common law does not.