Downtime And Disasters: Force Majeure Clauses In Technology Contracts

INTRODUCTION

In today's rapidly evolving digital economy, technology contracts form the backbone of countless commercial relationships — yet even the most carefully negotiated agreements can be upended by unforeseen events beyond the parties' control. Natural disasters, cyberattacks, pandemics, cloud outages, ransomware incidents, and sudden regulatory changes have all underscored the critical importance of force majeure clauses, which move from boilerplate to business-critical in moments of disruption.

Unlike traditional contracts, technology agreements often involve ongoing service obligations, making the stakes of a force majeure event particularly high. As courts increasingly scrutinise force majeure claims in the technology sector, parties must draft with precision, carefully defining excusable events, allocating risk, and setting clear notification and mitigation requirements. This article examines the implications of force majeure clauses on contractual obligations, highlights key judicial decisions, and offers practical guidance on drafting clauses that are robust, commercially sensible, and fit for the realities of the technology industry.

WHAT IS FORCE MAJEURE?

Force majeure refers to a contractual mechanism that relieves a party from liability for non-performance when certain extraordinary events or circumstances beyond that party's control prevent or hinder the fulfilment of contractual obligations. Traditionally rooted in civil law systems but now widely adopted across common law jurisdictions through express contractual terms, a force majeure clause typically identifies specific events — such as natural disasters, wars, terrorism, pandemics, government actions, or major infrastructure failures — that will trigger its operation.

For a force majeure event to excuse performance, the event must generally be unforeseeable, external to the parties, and make performance impossible, impracticable, or radically different from what was agreed. Importantly, force majeure does not automatically discharge a party from its obligations; relief depends on the precise wording of the contract, the causal link between the event and the non-performance, and the party's compliance with any notice and mitigation requirements set out in the clause. In technology contracts, where continuity of service and reliability are paramount, force majeure provisions must be carefully drafted to balance commercial expectations with genuine risk allocation, ensuring that the clause offers protection without creating loopholes for avoidable failures.

IMPLICATIONS OF FORCE MAJEURE CLAUSES ON CONTRACTS

Force majeure clauses are a common feature of commercial agreements, particularly in industries that are highly vulnerable to acts of God, natural disasters, and labour disruptions. Sectors such as construction, oil and gas, mining, and aviation routinely include force majeure provisions to address these risks. However, despite their prevalence, not all contracts include a force majeure clause, and even where such clauses are present, they are not always carefully or effectively drafted.

The precise effect of a force majeure clause depends heavily on its wording. Relief can range from a temporary suspension or delay in performance, to full or partial discharge from contractual obligations, and may also include exemption from liability for non-performance. The scope and nature of the relief generally reflect the type of agreement, the parties' appetite for risk, and, to some extent, the drafting skill of the legal advisors involved. Disputes concerning force majeure are typically adjudicated by either a court or an arbitral tribunal, with the intricacies of enforcement governed by the applicable law chosen by the parties in the contract.

Jurisdictions differ significantly in how they approach and interpret force majeure clauses. For example, New York courts apply a strict interpretation, confining force majeure relief to the specific events enumerated in the clause, while other jurisdictions adopt a more flexible approach. In California, emphasis is placed on the unforeseeability of the event, whereas English law does not require that force majeure events be unforeseeable or non-existent at the time of contracting. Moreover, some jurisdictions, including Turkey and New York, impose a duty on the party invoking force majeure to take reasonable steps to mitigate the impact of the event on their contractual performance. Generally, however, to successfully rely on a force majeure clause, the affected party must establish the following elements:

1. that a force majeure event (as defined under the agreement) has occurred;
2. that the force majeure event (solely) caused a disruption in the performance of obligations under the agreement;
3. that the disruption was sufficient enough to meet the threshold of the force majeure clause; and
4. that the relying party followed the set notice procedure (if any) in the agreement.

In certain common law and mixed legal systems, parties may invoke the doctrines of frustration of contract or impossibility of performance where a force majeure clause is absent, or where relief under such a clause is denied. However, these doctrines are narrowly construed and may not offer assistance depending on the nature and extent of the disruption. To successfully rely on frustration or impossibility, a party must generally demonstrate that:

1. the frustrating event occurred after the contract was formed;
2. the event was not caused by either party; and
3. the event renders performance impossible, illegal, or so fundamentally different from what was originally contemplated that it would be unjust to hold the parties to the contract.

It is important to note that frustration or impossibility cannot be invoked where the contract has expressly allocated the risk of the disruptive event, or where the event merely renders performance more costly or burdensome. In contrast to force majeure, frustration or impossibility operates automatically to discharge the parties from their contractual obligations. Many jurisdictions have enacted legislation to address the consequences of such discharge, particularly regarding the apportionment of expenses and losses arising from the frustrated contract. For instance, sections 1 to 4 of the Ghanaian Contracts Act, 1960 (Act 25) provide a statutory framework for the adjustment of rights and liabilities following frustration.

FORCE MAJEURE AND TECHNOLOGY CONTRACTS

In the technology sector, force majeure considerations typically arise in two key contexts; contracts with suppliers, subcontractors, or service providers, and contracts with customers. Technology companies frequently seek to adopt a narrow construction of force majeure in agreements with suppliers, thereby minimising their exposure to disruptions within the supply chain. Conversely, they often negotiate broader force majeure protections in customer contracts, affording themselves greater flexibility in circumstances where performance may be hindered.

While the overall structure of force majeure clauses in technology agreements mirrors that of more traditional industries, notable distinctions arise in the identification of force majeure events. In addition to conventional risks such as natural disasters and labour disputes, technology contracts often address industry-specific disruptions, including:

• Cyberattacks: Significant cyber incidents that materially impair a party's ability to perform contractual obligations for a sustained period are increasingly recognised as force majeure events. Relief is typically excluded unless the incident results from the affected party's negligence or failure to maintain appropriate cybersecurity measures.
• Governmental or Regulatory Intervention: Given the evolving regulatory environment in the technology sector, sudden changes in law, policy reversals, or regulatory interventions that materially affect a company's business model, products, or services are often classified as force majeure events.
• Power or Network Outages: Continuous access to electricity and network infrastructure is fundamental to the operation of technology companies. Total, unforeseeable outages are commonly treated as force majeure events in the West, while foreseeable interruptions, such as scheduled maintenance, are typically excluded. However, in Africa where power outages are common, parties often look to exclude such outages from force majeure events.
• Telecommunications Failures: Failures in telecommunications networks that impede a party's ability to fulfil its contractual obligations are increasingly listed among qualifying force majeure events.
• Supply Chain Disruptions: For technology companies dependent on hardware components, or specialised materials, substantial supply chain disruptions that prevent the procurement of necessary inputs are frequently captured within the scope of force majeure.

As the operational risks faced by technology businesses continue to evolve, it is imperative that force majeure clauses are drafted with precision. Clear delineation of qualifying events, careful consideration of mitigation obligations, and an appropriate allocation of risk are essential to ensuring that the clause provides meaningful protection in the event of disruption.

FORCE MAJEURE IN TECHNOLOGY CONTRACTS: RECENT CASE ANALYSIS

1. Delta Air Lines v. CrowdStrike Inc. (2024)

In July 2024, a software update from cybersecurity firm, CrowdStrike, led to a global IT outage, severely impacting Delta Air Lines. The airline cancelled over 7,000 flights, affecting approximately 1.3 million passengers, and reported losses exceeding $500 million. Delta filed a lawsuit against CrowdStrike, alleging negligence and breach of contract, claiming that the faulty update caused the operational disruptions. CrowdStrike refuted the claims, attributing Delta's extended recovery to its outdated IT infrastructure.

Legal Analysis: This case underscores the importance of clearly defined force majeure clauses in technology contracts. If Delta's contracts with customers included force majeure provisions encompassing IT outages, the airline might invoke such clauses to mitigate liability. Conversely, the effectiveness of such a defense would depend on the clause's specificity and the airline's efforts to prevent or mitigate the disruption. The case also highlights the need for service providers to ensure rigorous testing and validation of software updates to avoid liability.

2. RTI Ltd v. MUR Shipping BV [2024] UKSC 18

RTI Ltd chartered vessels from MUR Shipping for transporting bauxite, with payments stipulated in US dollars. Following US sanctions on RTI's parent company, MUR invoked a force majeure clause, citing difficulties in receiving USD payments. RTI offered to pay in Euros, covering any additional costs, but MUR declined and suspended performance. The UK Supreme Court held that, absent explicit contractual terms, MUR was not obligated to accept non-contractual performance (payment in Euros) to mitigate the force majeure event .

Legal Analysis: The judgement emphasizes that "reasonable endeavours" clauses do not compel parties to accept alternative, non-contractual performance unless expressly stated. This decision reinforces the principle of contractual certainty, indicating that parties are not required to forgo their contractual rights in the face of unforeseen events. For technology contracts, this underscores the necessity of precise drafting to delineate obligations during force majeure events.

3. 2 Entertain Video Ltd & Others v. Sony DADC Europe Ltd [2020] EWHC 972 (TCC)

During the 2011 London riots, Sony's warehouse, storing media products for 2 Entertain, was destroyed by fire. Sony claimed the incident was a force majeure event under their contract. However, the High Court found that Sony had failed to take reasonable precautions against foreseeable risks, such as installing adequate fire prevention measures. Consequently, the force majeure defense was unsuccessful.

Legal Analysis: This case illustrates that foreseeability and preventive measures are critical in force majeure claims. Even if an event is listed in a force majeure clause, a party may not be excused from liability if it failed to take reasonable steps to prevent or mitigate the event's impact. In technology contracts, this highlights the importance of proactive risk management and the implementation of appropriate safeguards.

4. Sony PlayStation Network Data Breach Litigation (2011)

In 2011, Sony's PlayStation Network suffered a significant data breach, compromising personal information of approximately 77 million users. A class-action lawsuit ensued, alleging Sony's failure to implement adequate security measures. Sony settled the lawsuit for $15 million without admitting liability.

Legal Analysis: Although force majeure was not a central issue in this case, it underscores the potential for cyberattacks to disrupt services and lead to substantial liability. For technology contracts, explicitly including cyberattacks as force majeure events, along with clear definitions and obligations, can provide a framework for managing such risks.

DRAFTING AND NEGOTIATING FORCE MAJEURE CLAUSES: A PRACTICAL AND DETAILED GUIDE

Force majeure clauses are no longer treated as mere boilerplate provisions. Parties and their legal advisors increasingly understand that a force majeure clause must be thoughtfully negotiated and carefully drafted to suit the specific context of the contract. Effective drafting can safeguard a party's interests during significant disruptions, while poor drafting can leave parties exposed to uncertainty, disputes, and unintended liabilities.

This guide sets out key considerations for the negotiation and drafting of robust, enforceable force majeure clauses.

1. Defining Force Majeure Events

Specific vs General Events

It is advisable to expressly identify the events that constitute force majeure rather than relying solely on vague or general phrases, such as "events beyond the reasonable control of the parties."

• Specificity promotes clarity and certainty: Courts and arbitral tribunals are more likely to enforce clauses where the events listed are tangible and measurable.
• Use of a "catch-all" provision: After listing specific events, a carefully drafted catch-all phrase can protect against unanticipated risks, but it should be crafted narrowly to avoid becoming meaningless.

Tailoring Events to the Industry and Transaction

The list of force majeure events should reflect the nature of the agreement and the specific risks faced by the parties in their sector.

In technology contracts, risks like cyberattacks, data breaches, network or data centre outages, software system failures, and significant regulatory shifts are often relevant.

In infrastructure or energy projects, natural disasters, equipment breakdowns, and labour strikes may take priority.

Practical Tip: Avoid overly broad or highly speculative events (e.g., "any difficulties") without tying them to real-world, plausible risks. Overbreadth can lead to interpretation issues or even invalidation.

2. Considering the Jurisdiction of Performance

Jurisdictional Risk Factors

The location where the contract is to be performed significantly influences what constitutes a credible force majeure event:

• Weather patterns: Regions prone to hurricanes, floods, earthquakes, or wildfires may justify the inclusion of specific natural disasters.
• Political and regulatory environment: Emerging markets may carry higher risks of sudden regulatory changes, nationalisation, or government-imposed restrictions.
• Infrastructure reliability: In jurisdictions with unstable electricity supply, telecommunications systems, or transportation networks, clauses should reflect those local risks.

Legal Interpretation Under Applicable Law

Different jurisdictions interpret force majeure clauses differently:

• Strict interpretation (e.g., New York): Relief is limited to events expressly listed or fitting narrowly within the clause.
• Broader interpretation (e.g., parts of Europe): Courts may imply force majeure where the disruption is truly beyond control, even without specific listing.

Practical Tip: Always cross-check the drafting against the interpretation rules of the chosen governing law.

3. Addressing Foreseeability and Lack of Control

Foreseeability Standard

To qualify as force majeure, the event typically must be unforeseeable at the time of contracting. Some clauses explicitly incorporate this requirement:

• If the event could reasonably have been foreseen and addressed by contingency planning, it should not relieve performance.

Requirement of Lack of Fault

The clause should clearly stipulate that relief is available only where the affected party is not at fault:

• Events arising from negligence, poor maintenance, or inadequate risk management practices should not qualify.

Practical Tip: Consider adding language requiring that the event must be "beyond the reasonable control and without the fault or negligence" of the affected party.

4. Defining the Disruption Threshold

Degree of Disruption

Not every difficulty qualifies as force majeure. The clause must specify the required degree of disruption:

Common standards include:

• "Impossible" to perform;
• "Impracticable" to perform (where performance becomes excessively difficult or expensive);
• "Substantially hindered" or "materially delayed".

Calibration Based on Risk Allocation

• A higher threshold (e.g., "impossibility") places more risk on the party invoking force majeure.
• A lower threshold (e.g., "commercial impracticability") may provide more protection to the affected party.

Practical Tip: Align the disruption standard with the criticality of the contract and the parties' negotiated risk balance.

5. Notice and Communication Requirements

Timing of Notice

The clause should establish clear obligations regarding notification:

• Should notice be provided upon occurrence of the event, awareness of the impact, or disruption of performance?

Content of Notice

• Description of the event.
• Explanation of how the event affects performance.
• Steps being taken to mitigate the impact.

Ongoing Communication

• Regular updates should be required where the disruption is prolonged.
• Parties should be informed about mitigation efforts and expected timeframes for resolution.

Practical Tip: Set reasonable notice periods, balancing the need for prompt information with the practical challenges during major disruptions.

6. Mitigation Obligations

Efforts to Minimise Impact

A properly drafted clause should require the affected party to use reasonable efforts (or best efforts) to overcome the disruption and resume performance.

Scope of Mitigation

• Sourcing alternative suppliers.
• Implementing workarounds.
• Taking emergency measures to limit harm.

Practical Tip: Failure to undertake reasonable mitigation should bar or reduce the relief available under the force majeure clause.

7. Specifying the Consequences of Force Majeure

Effect on Performance

The clause must expressly state the contractual consequences if a force majeure event occurs:

• Suspension of obligations for a specified period;
• Extension of delivery timelines; and/or
• Termination of the contract after a prolonged force majeure period.

Allocation of Risk and Costs

• Address whether each party bears its own costs during suspension;
• State how liabilities incurred prior to the event (e.g., unpaid invoices) are treated.

Partial Force Majeure

• Where possible, limit the excuse to obligations directly affected by the event, preserving unaffected parts of the contract.

Practical Tip: Avoid ambiguity about termination rights, liability distribution, and treatment of payments made before the force majeure event.

CONCLUSION

Force majeure clauses have taken on new significance in technology contracts, where operational risks such as cyberattacks, regulatory changes, and supply chain disruptions are increasingly common. As recent cases show, courts interpret these clauses narrowly, requiring clear drafting and strong evidence of genuine impact.

To be effective, force majeure clauses must be carefully tailored to the industry, the specific risks of the agreement, and the governing law. Standard templates are no longer sufficient. By taking a thoughtful, precise approach to drafting — from defining events to setting notice, mitigation, and consequence provisions — parties can better protect themselves against unforeseen disruptions and strengthen the resilience of their commercial relationships.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.