Understanding Force Majeure through Agreement Analysis

Understanding Force Majeure through Agreement Analysis

Since the onset of COVID-19, organizations are reassessing their intercompany agreements to include Force Majeure clauses. If you are unfamiliar with Force Majeure, read our previous blog for more information. Force Majeure is an “Act of God” clause that allows involved parties to renegotiate or terminate an agreement if an unforeseen or unpredictable event occurs. 

We wanted to explore these clauses to see what we could find regarding terms, agreement structures, and how COVID-19 has had an impact on certain industries. When searching “Force Majeure” in the ktMINE Search App we found more than 26,000 full-text agreements covering several industries and territories. For our comparison, we narrowed our industries to Oil & Gas and Internet.

Initially looking at Force Majeure clauses within Internet, we notice simple and complex clauses without crossing industries. ktMINE’s Paragraph View tool allowed us to instantly identify agreement clauses. The longest contract was 47 pages long, so having the ability to quickly filter to specific sections created time savings.

ktMINE Paragraph ViewktMINE Paragraph View

The clauses excluding each party from their responsibilities range from simple to including complexities that outline what occurs once the Force Majeure event is over. 

Examining our Oil & Gas search, the clauses contain more detailed language compared to the clauses found in the Internet search.

paragraph view

Diving into this section, the document outlines what activities need to be affected to be considered a Force Majeure event with greater detail. 

While Force Majeure seems simple to implement, structuring these clauses within intercompany agreements can be very complicated. The opportunities granted to each party are heavily dependent upon the agreement terms. With so much importance riding on the language, having the ability to quickly review contractual language is even more important. If you want to learn more about the data ktMINE has curated around Force Majeure and the tools built to make clause-based analysis quicker, contact us today.

About the author: Brett Schoell
Brett Schoell
As the lead development and account manager for ktMINE’s Transfer Pricing, Valuation, and Forensics markets, Brett Schoell supports clients’ research efforts to reduce the time needed to make critical business decisions. With ktMINE, Schoell has been involved in economic discussions in the transfer pricing community. He coordinates and leads technical training sessions on TP analysis issues. His client interactions range from tax executives to economic consultants, coordinating with global business teams.