Force Majeure Clauses in Commodity Contracts: Protecting Against Supply Disruptions

A buyer signs a contract for several containers of agricultural commodity at a fixed price. Before shipment, an export restriction is announced in the origin country, a port closes after severe weather, or a logistics breakdown makes the agreed delivery window impossible. Suddenly neither party can perform as planned — and the contract becomes a battleground over who bears the loss. Was the seller obligated to deliver regardless? Could the buyer walk away? The answer turns almost entirely on one clause that both parties may have skimmed over when signing: force majeure.

Force majeure clauses are among the most consequential — and most neglected — provisions in commodity contracts. In ordinary times they sit unread at the back of the agreement. When a genuine disruption strikes, they determine whether a party is excused from performance, liable for damages, or trapped in a dispute. Buyers and sellers who treat force majeure as boilerplate discover, too late, that the wording does not say what they assumed.

This guide explains what force majeure clauses do in commodity contracts, what events they typically cover, the common pitfalls that render them ineffective, and a drafting checklist to protect against supply disruptions.

What Force Majeure Actually Means

Force majeure is a contractual provision that excuses one or both parties from performing their obligations when an extraordinary event beyond their control prevents performance. The principle is that a party should not be held in breach for failing to do something made impossible by an event it could not foresee, prevent, or overcome.

Crucially, force majeure is a creature of contract. Unlike some legal doctrines that apply automatically, force majeure rights generally exist only to the extent the contract grants them — and exactly as the contract defines them. There is no universal definition; the protection a party enjoys depends on the specific wording agreed.

Because each of these elements is negotiable, two contracts with "force majeure" clauses can offer very different protection.

Events Commonly Covered in Commodity Contracts

Force majeure clauses typically combine a list of specific events with a general catch-all. Events frequently relevant to agricultural commodity trade include:

• Natural events — floods, storms, drought, earthquakes, and other extreme weather affecting harvest, storage, or transport.
• Government action — export bans, import restrictions, quotas, embargoes, licensing changes, and new regulatory requirements.
• Port and logistics disruption — port closures, severe congestion, vessel unavailability, and transport breakdowns where specified.
• Crop failure — in some contracts, a failure of the underlying harvest (often carefully defined and limited).
• Civil and political events — war, civil unrest, strikes, and terrorism.
• Public health events — epidemics and pandemics, where the clause expressly includes them.

The catch-all phrase — often "any other event beyond the reasonable control of the parties" — is intended to cover unforeseen events not specifically listed, but courts in many jurisdictions interpret such phrases narrowly. This is why important risks should be named explicitly rather than left to a general catch-all.

Why Many Force Majeure Clauses Fail

A clause that exists is not the same as a clause that protects. Common pitfalls leave parties exposed at the worst moment:

• Vague event lists — relying on a generic catch-all instead of naming the specific risks relevant to the trade lane and commodity.
• Wrong causation standard — a clause requiring performance to be "prevented" (impossible) offers far less than one covering events that "hinder" or "delay" performance; price changes or increased cost usually do not qualify under a strict "prevented" standard.
• Missed notice deadlines — many clauses require prompt written notice within a set period; missing it can forfeit the entire right to relief.
• Ignored mitigation duty — a party that fails to take reasonable steps to work around the disruption may lose protection.
• No clear consequences — if the clause does not say whether the contract is suspended, extended, or terminated, the parties are left to dispute it.
• Foreseeability problems — an event known or foreseeable at signing may not qualify, so the clause must be read in light of conditions at the time of contracting.
• "Economic hardship" confusion — force majeure generally excuses impossibility, not unprofitability; a price move that makes the deal a loss is rarely covered.

These pitfalls explain why disputes erupt precisely when the clause is supposed to provide certainty.

How Force Majeure Plays Out During a Disruption

When an event occurs, a typical sequence applies:

1. The affected party assesses whether the event meets the contract's definition and causation standard.
2. Notice is given to the other party within the required timeframe and in the required form, describing the event and its expected impact.
3. Mitigation is attempted — reasonable steps to reduce or work around the disruption.
4. Performance is suspended or extended for the duration of the event, as the clause provides.
5. If the event continues beyond a defined period, the clause may allow either party to terminate without liability.
6. Records are kept documenting the event, the notice, and the mitigation efforts in case of later dispute.

Getting each step right — especially timely notice and documented mitigation — is what turns a clause on paper into effective protection.

Drafting and Review Checklist

Before signing any commodity contract, work through this checklist on the force majeure clause:

• ☐List the specific events relevant to your commodity and trade lane (export bans, port closures, weather, etc.).
• ☐Confirm the causation standard — "prevents," "hinders," or "delays" — and ensure it matches your risk tolerance.
• ☐Check whether government export/import restrictions are expressly included.
• ☐Confirm the notice requirement: timeframe, form, and recipient.
• ☐Define the consequences clearly — suspension, time extension, and a termination trigger if the event persists.
• ☐Specify how costs are allocated during the force majeure period.
• ☐Include and define a mitigation obligation for both parties.
• ☐Clarify how it interacts with the Incoterm, payment terms, and any letter of credit.
• ☐Address foreseeability — what happens if a developing situation worsens after signing.
• ☐Distinguish force majeure (impossibility) from price/cost changes (commercial risk).
• ☐Confirm the governing law and dispute-resolution forum for the contract.
• ☐Keep both parties' obligations balanced rather than one-sided.

A well-drafted clause does not eliminate disruption risk, but it allocates it clearly in advance — which is exactly what prevents costly disputes later.

Why MC International

MC International S.P.A Co., Ltd has exported agricultural commodities from Thailand since 2015, serving more than 500 clients across over 40 countries with rice, sugar, urea, edible oils, coconut products, and tapioca starch. Years of trading across diverse and sometimes volatile markets have taught us that clear, balanced contracts protect both buyer and seller when the unexpected happens. We trade on FOB, CFR, and CIF terms through Laem Chabang and Bangkok, and we work with buyers to ensure contract terms — including how disruptions are handled — are understood before commitment rather than disputed after the fact.

Strong contractual protection works best alongside reliable performance. Our SGS inspection, ISO 9001, HACCP, and Halal certifications, our established supplier relationships, and our experience managing export logistics reduce the likelihood that ordinary issues escalate into disruptions in the first place. When genuine force majeure events affect a trade lane, our priority is transparent communication and reasonable cooperation to find workable solutions — keeping long-term relationships intact rather than treating every disruption as a fight. That combination of clear contracts and dependable execution is what buyers value when supply conditions tighten.

Contact

Discuss contract terms and supply continuity for your next order, and we will work toward clear, balanced terms that protect both sides.

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MC International S.P.A Co., Ltd | Registration 0145567003152 | Lampang, Thailand.