If you are a supplier or contractor operating in Australia, there is a real chance that the conflict in the Middle East is affecting your ability to deliver your contracts. Many contractors and suppliers are turning to force majeure clauses for relief.
A force majeure clause may excuse a party from performing their contractual obligations when an extraordinary event beyond their reasonable control – such as war – makes performance impossible or impracticable.
The Golden Rule: Force majeure is whatever your contract says
In Australia, there is no automatic legal concept of “force majeure” that protects you if your contract does not deal with it. Force majeure is a purely contractual mechanism – its effect depends entirely on the words in your clause. If you want force majeure protection, it has to be in your contract, and the protection you get is only as good as the words used.
Your first step: Find the force majeure clause and look at two things:
- The trigger events – does it mention war, armed conflict, sanctions, government action, or trade embargoes?
- The threshold words – does it say you are excused if you are “prevented” from performing? Or “hindered” or “delayed”? These words matter enormously.
“It’s just too hard now” is usually not enough
Force majeure is usually not triggered simply because performance has become more difficult or expensive.
You need to show that the qualifying event has actually prevented you from performing – or, if your clause uses softer language, that it has genuinely hindered or delayed you. There must be a real causal link between the event and your failure to perform. If you stopped performing because your margin collapsed or your supplier increased prices, that is generally not enough.
The Notice Requirement – notify early
Most force majeure clauses require you to notify your counterparty promptly – describing the event, the obligations affected, the expected duration, and the steps you are taking to mitigate.
Australian courts treat notice requirements very strictly.
Your next steps:
- Read your notice clause – who, how, where, and by when?
- Cover all required content: the event (name it specifically – relevant sanctions, port closures, carrier refusals), which obligations are affected, estimated duration, and steps to mitigate.
- Keep date-stamped copies and delivery receipts, as well as contemporaneous records to support your claim.
Mitigation
Force majeure clauses often require you to use “all reasonable endeavours” (or sometimes “best endeavours”) to mitigate the effects of the event. Failing to do so can strip you of the protection of the force majeure clause.
Reasonable mitigation in the Iran context might include:
- Investigating alternative suppliers in non-affected regions
- Exploring alternative shipping routes (even if longer or more costly)
- Proposing revised delivery schedules rather than complete suspension
- Partial performance where feasible
Keep detailed records of every step you take – every quote sought, every alternative explored, and why it was (or was not) viable.
Who pays?
A force majeure clause that excuses you from breach does not, by itself, entitle you to the extra cost caused by the force majeure event or the steps you may have taken to mitigate the event.
Always read your force majeure clause with the rest of your contract, including your:
- Extension of time & Delay costs clause – which events entitle you to more time? Can you claim delay costs associated with force majeure-related delays?
- Variation clause – can changed circumstances be addressed by a variation?
- Rise and Fall clauses might give you an opportunity to reprice in certain circumstances.
- Change in Law clauses – If sanctions or government restrictions arising from the conflict constitute a “change in law” under your contract, you may have a right to additional time or cost recovery.
These different clauses interact and should be read together.
Lastly, do not underestimate the value of simply talking to your counterparty. Approaching the conversation early, in good faith, and with documented evidence of the disruption will almost always produce better outcomes than a unilateral suspension.
Need support?
If you have specific questions relating to a contract or other legal matter, the Source legal team is here to support you. Please get in touch and a member of our team will be in contact.
This article provides general legal information only and does not constitute legal advice. The application of these principles to your specific contracts and circumstances requires analysis by a qualified Australian lawyer.
Article by:
Jack Sheppard, Senior Legal Counsel, Commercial Legal
Jelena Milanovic, Director, Commercial Legal
