Every contract has a force majeure clause and almost nobody negotiates it, because it concerns events nobody expects. Then something happens - a flood, an import restriction, a supply collapse - and the clause is read carefully for the first time, usually to discover it does not cover what occurred.
Force majeure is contractual
| Force majeure | Frustration | |
|---|---|---|
| Source | The contract | Section 56, Contract Act 1872 |
| Applies when | The clause says so | Performance becomes impossible or unlawful |
| Effect | As the clause provides - suspension, extension, termination | The contract becomes void |
| Flexibility | Whatever the parties agreed | Narrow, and all or nothing |
| Needs notice? | Usually yes, per the clause | Not a notice regime |
The difference matters commercially. Frustration is narrow and blunt - it ends the contract entirely. A force majeure clause lets you agree something more useful: performance suspended while the event lasts, an extension of time, and termination only if it runs beyond a defined period.
What is generally not enough
- The contract became more expensive to perform.
- Currency movement made the deal unprofitable.
- Your supplier let you down, unless the clause covers it.
- You could perform but it would cause you loss.
- An event you could have worked around with reasonable steps.
- An event within your own control or caused by your default.
- Something foreseeable at the date of contracting.
The first two are the arguments most often attempted in Pakistan and most often rejected. A contract becoming unprofitable is not the same as becoming impossible, and neither force majeure nor frustration is a general escape from a bad bargain. If price movement is a real risk in your deal, deal with it in a price adjustment clause, not in force majeure.
Drafting a clause that works
- List the events specifically - and add a general catch-all.
- Say whether epidemics, government action and supply failure are included.
- Require the event to prevent, hinder or delay - and say which.
- Require causation - the event must actually cause the failure.
- Impose a notice obligation, with a period and a form.
- Require mitigation - reasonable steps to work around it.
- State the effect - suspension, extension, or relief from damages.
- Provide a long-stop - termination if it exceeds a stated period.
- Deal with payment obligations during the event.
Point nine is regularly omitted and regularly disputed. Force majeure typically excuses performance, not payment for what has already been performed - say so expressly rather than leaving it to argument.
Invoking the clause properly
- Read the clause first - the events, the notice period, the form.
- Establish the causal link between the event and your inability to perform.
- Serve notice within the period, at the contractual address.
- State the event, its effect and the expected duration.
- Evidence it - notifications, closures, official orders.
- Take mitigating steps and record them.
- Update the other party as the position changes.
- Notify when it ends and resume performance.
Late notice is the commonest way a good force majeure claim fails. Many clauses require notice within a short window of the party becoming aware, and a party that waited to see whether the problem would resolve frequently finds it lost the relief it was entitled to - see notice requirements generally.
If the other side invokes it
- Check the notice complies with the clause - timing, form, content.
- Check the event is within the listed categories.
- Test causation - did it actually prevent performance?
- Ask what mitigation they undertook.
- Ask for evidence of the event and its effect on them.
- Reserve your rights in writing rather than accepting the position.
- Consider your own options - alternative supply, the long-stop.
Reserve rights explicitly. A party that acknowledges a force majeure notice without qualification may find it harder later to argue the clause never applied.
When frustration applies instead
Where there is no clause, or the event falls outside it, section 56 may still operate.
- Performance must become impossible or unlawful, not merely harder.
- The event must not be self-induced.
- It must not have been foreseen and provided for.
- The effect is that the contract becomes void - it ends for both sides.
- Restitution questions follow, on advantages received.
- Take advice, since the threshold is high and the outcome blunt.
Frustration is a poor substitute for a decent clause. It ends the contract entirely, which is frequently not what either party wants - a supplier facing a three-month disruption usually wants an extension of time, not the destruction of a contract they intend to perform. Draft the clause and you keep the choice.
Sector-specific events worth naming
A generic list of events copied from a template frequently omits the risks that actually affect your business. Name the ones that matter to you.
| Sector | Events worth naming expressly |
|---|---|
| Export and manufacturing | Port closure, shipping disruption, import or export restrictions, raw material embargo |
| Construction | Extreme weather, material shortage, site access denial, regulatory stop orders |
| Agriculture | Flood, drought, crop disease, livestock restrictions |
| Technology and services | Prolonged internet or power disruption, cyber incidents, data centre failure |
| Retail and distribution | Supply chain failure, transport strikes, prolonged closures |
| Any sector | Epidemics, government action, civil disturbance, currency controls |
Pakistan-specific risks deserve express treatment: flooding, prolonged power disruption, transport strikes and sudden changes in import policy are all foreseeable enough to name, and naming them removes the argument about whether the catch-all covers them.
There is a tension worth understanding. Force majeure generally requires the event to be beyond reasonable control and not reasonably foreseeable - so a recurring, well-known local risk may be harder to claim under a general catch-all. Naming it expressly is precisely how you deal with that, because the parties have then allocated the risk deliberately.
Reviewing your existing contracts
| Check | Why |
|---|---|
| Does a clause exist at all? | Many short-form contracts have none |
| Are the listed events adequate? | Older clauses often omit epidemics and cyber events |
| Is government action covered? | Import restrictions, licensing, closures |
| Is supply chain failure covered? | Frequently excluded by implication |
| Is the notice period workable? | Very short periods are easy to miss |
| Is there a long-stop? | Otherwise suspension can run indefinitely |
| Does it work both ways? | Check whether it is one-sided |
Review this at renewal rather than after an event. See contract law essentials.
Frequently asked questions
What is force majeure?
A contractual allocation of risk for events beyond a party's control. It operates only if and to the extent the contract provides for it - there is no general doctrine of force majeure independent of the clause.
How is it different from frustration?
Frustration arises under section 56 of the Contract Act 1872 where performance becomes impossible or unlawful, and it makes the contract void. A force majeure clause can provide something more useful, such as suspension or an extension of time.
Does increased cost count as force majeure?
Generally no. A contract becoming unprofitable is not the same as becoming impossible, and neither force majeure nor frustration is an escape from a bad bargain. Handle price risk in a price adjustment clause instead.
What should a force majeure clause contain?
Specific listed events plus a catch-all, a causation requirement, a notice obligation with a period and form, a mitigation requirement, the effect on performance, a long-stop for termination, and treatment of payment obligations.
How do I invoke the clause?
Read it first, establish the causal link, serve notice within the period at the contractual address stating the event, its effect and expected duration, evidence it, take mitigating steps, and notify when it ends.
What most often defeats a force majeure claim?
Late notice. Many clauses require notice shortly after the party becomes aware, and a party that waited to see whether the problem would resolve frequently loses the relief it was entitled to.
The other side has invoked force majeure. What should I do?
Check the notice complies with the clause, that the event is within the listed categories, and that it actually caused non-performance. Ask what mitigation was undertaken, request evidence, and reserve your rights in writing.
Does force majeure excuse payment?
Typically it excuses performance rather than payment for what has already been performed - but say so expressly in the clause rather than leaving it to argument later.
Which events should I name in the clause?
The ones that actually affect your sector - port closure and import restrictions for exporters, extreme weather and material shortage for construction, prolonged power or internet disruption for technology, plus epidemics and government action generally.
Can I claim force majeure for a well-known local risk?
It is harder under a general catch-all, since force majeure usually requires the event to be beyond reasonable control and not reasonably foreseeable. Naming recurring local risks expressly is how you allocate them deliberately.
Sources & official references
- Contract Act 1872 - the statute governing contracts in Pakistan
- Supreme Court of Pakistan - judgments and case information
- State Bank of Pakistan - foreign exchange and trade payment regulation