This protects you if a government action—like a ban, seizure, or court order—makes performance impossible. For example, if the government suddenly prohibits the import of a product you've contracted to sell, you're not liable for breach. This is legally important because courts recognize that parties cannot be expected to break the law or defy government orders. However, this clause is narrower than it sounds: it only covers direct government action, not general laws that apply to everyone equally. If a new tax law makes your contract less profitable, that's usually not covered.
Define "Act of Authority" clearly in the contract—does it include new laws, or only direct government orders against your company? Ask whether the party must exhaust legal remedies first (like appealing a ban). Consider whether this clause should apply if the government action was foreseeable when you signed the contract. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This protects you if a government action—like a ban, seizure, or court order—makes performance impossible.
Why should I care about this clause?
For example, if the government suddenly prohibits the import of a product you've contracted to sell, you're not liable for breach.
What are my options?
This is legally important because courts recognize that parties cannot be expected to break the law or defy government orders.
How does this affect small businesses?
However, this clause is narrower than it sounds: it only covers direct government action, not general laws that apply to everyone equally.