Does "War" Or "Government Action" Trigger My Force Majeure Clause Or Otherwise Excuse Supply Chain Performance?

The disruption in the Iran Strait of Hormuz is a major maritime chokepoint event affecting shipping capacity, transit times, pricing for energy and industrial commodities, and supply chains across the globe. A substantial portion, reportedly up to 47%, of global seaborne trade transits the Strait of Hormuz, and this disruption has contributed to elevated pricing and reduced reliability across multiple commodity categories that make up a substantial part of the automotive supply chain. It has been coined “the largest oil disruption in 50 years.” Specifically, buyers and sellers are reporting product damage, price volatility and increases, insurance and risk-transfer constraints, and more frequent disruption through delays, precautionary hoarding behavior, and “just-in-case” inventory management strategies. Even if the war ends soon, which is very uncertain at this time, recovery times are expected to be substantial–oil fields can restart within days once exports normalize, but other commodities take longer. Restarting supply can take 4-6 weeks and infrastructure repairs could take 3-5 years.

Relevant to this overview, Qatar declared a force majeure event on March 4, and European natural gas prices spiked after Iranian drone strikes damaged Qatar's Ras Laffan. Reportedly, insurance and capacity constraints are currently affecting 329 tankers in the Gulf which need $352B in coverage.

These facts matter legally because supply excuse doctrines like force majeure are highly dependent on (a) what event occurred, (b) whether it was outside the parties’ basic assumptions at contracting, (c) whether performance became truly impracticable (not merely more expensive), and (d) whether the party invoking excuse complied with contractual and statutory notice/allocation obligations. Practically here, buyers and sellers alike are looking to whether ‘war’ or ‘governmental actions’ are themselves triggering events and whether the effects rise to the level necessary to trigger excuse of supply.

Under Michigan law, if your contract contains a force majeure clause, courts generally look first to the clause’s text to determine whether the event is covered, what performance is excused (delay vs. nonperformance), and what procedural steps are required (notice, mitigation, documentation, and resumption). Because force majeure clauses vary widely, the outcome often turns on whether the clause includes (or excludes) specific language about the triggering events; here, such as war/hostilities, terrorism, embargoes, port closures, carrier unavailability, governmental actions, or insurance unavailability, and whether it contains “catch-all” language tied to events beyond reasonable control. For contracts for the sale of goods, Michigan’s version of the Uniform Commercial Code (UCC) provides a seller-focused excuse doctrine where delay or non-delivery may be excused if performance has become “impracticable” due to an event that was not contemplated by the parties at the time of contract. If the disruption affects only part of a seller’s capacity, the seller is generally expected to allocate production and deliveries among customers in a fair and reasonable manner, and to provide seasonable notice of delay/non-delivery and any estimated quota available to the buyer. But some buyer contract terms purport to modify this UCC allocation method and specify favorable treatment (which clauses may or may not be enforceable, depending on the court).

Michigan recognizes supervening impossibility/impracticability principles that may excuse performance when an unanticipated event makes performance impossible or impracticable in the sense of extreme and unreasonable difficulty, injury, or loss. Absolute impossibility is not necessarily required, but the change must be more than ordinary market fluctuation or a bad bargain. This analysis also commonly considers foreseeability and risk allocation—i.e., whether the event was reasonably foreseeable at the time of contracting and whether the contract (expressly or by commercial context) placed the risk on one party.

For sellers, the key questions are whether you can (1) invoke a contractual force majeure clause, and/or (2) establish statutory/common-law excuse, while (3) preserving customer relationships and minimizing damages exposure. To do that here, sellers should be on the lookout for considerations that show performance became extremely difficult or unreasonable under the circumstances, or that a qualifying event undermined a basic assumption of the deal. This may include evidence of:

1. Carrier refusals, details of the route closures, or inability to secure vessel space within commercially reasonable timeframes.
2. War-risk or marine insurance unavailability where insurance is commercially required to ship.
3. Governmental restrictions, sanctions-related compliance constraints, or port authority limitations affecting shipment.
4. Documented upstream outages and force majeure notices that directly reduce your available supply.

From a risk-management standpoint, sellers affected will have to consider notice obligations, documentation, allocation methodology, and crisis management and communication. An upstream supplier’s force majeure declaration is helpful evidence, but it does not automatically excuse your obligations to your customers; you typically must show how the upstream event made your own performance impracticable and that you complied with any allocation/notice duties applicable to you.

Buyers face similar risks, motivated by the immediate objectives to (1) preserve supply continuity, (2) preserve contractual rights, and (3) build a record to challenge an overbroad excuse claim. Thus, buyers commonly look for issues of foreseeability, causation, and the degree of hardship of performance versus more expensive. Buyers will also need to consider whether allocation is appropriate based on statute or the contract, and will need to document and communicate regarding all replacement activities. Prudent buyers demand additional evidence from suppliers regarding inventory levels and mitigation efforts (workaround plans).

The key takeaway: a contract-specific review is required.  Several important issues cannot be resolved at a general level without reviewing your specific contracts and transaction facts, including:

1. Whether your force majeure clause covers this type of disruption and what procedural prerequisites apply.
2. Whether delivery terms and risk allocation provisions shift responsibility for transportation, insurance, or routing decisions.
3. The extent to which price adjustment, index pricing, or escalation provisions address volatility.
4. The remedies framework (including cover/market damages concepts and any contractual limitations).

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.