A cross-liability clause in a force-majeure context modifies how liability is allocated when unforeseen events (such as natural disasters, pandemics, wars, or other acts beyond parties' control) prevent contract performance. Specifically, this clause typically allows each party to invoke force-majeure protections against the other party, even if one party caused or contributed to the triggering event. In other words, it prevents a party from being held liable for non-performance due to force-majeure circumstances, regardless of whether their own actions played a role in creating the conditions that led to the force-majeure event.
This clause matters significantly because it can dramatically shift risk allocation. Without it, a party might argue that the other party's negligence or intentional conduct "caused" the force-majeure event and therefore should not be excused from performance. With a cross-liability clause, both parties receive equal protection. However, this can create moral hazard—a party might have less incentive to prevent or mitigate a force-majeure event if they know they'll be excused from liability anyway. Courts and sophisticated parties often view these clauses with skepticism, particularly when one party's conduct was grossly negligent or intentional.
Approach cross-liability clauses with caution. If you are the party more likely to cause or contribute to a force-majeure event (or if you have greater ability to prevent one), resist this language and instead propose that force-majeure excuses only apply when the event was truly beyond the excused party's control and not caused by their negligence or willful misconduct. Conversely, if you are the vulnerable party with less control over potential triggering events, you may want to negotiate for cross-liability protection. At minimum, define "force majeure" narrowly, require prompt notice and mitigation efforts, and consider adding carve-outs for events caused by gross negligence or intentional acts.
Frequently Asked Questions
What does this clause mean in simple terms?
A cross-liability clause in a force-majeure context modifies how liability is allocated when unforeseen events (such as natural disasters, pandemics, wars, or other acts beyond parties' control) prevent contract performance. Specifically, this clause typically allows each party to invoke force-majeure protections against the other party, even if one party caused or contributed to the triggering event.
Why should I care about this clause?
In other words, it prevents a party from being held liable for non-performance due to force-majeure circumstances, regardless of whether their own actions played a role in creating the conditions that led to the force-majeure event. This clause matters significantly because it can dramatically shift risk allocation.
What are my options?
Without it, a party might argue that the other party's negligence or intentional conduct "caused" the force-majeure event and therefore should not be excused from performance. With a cross-liability clause, both parties receive equal protection.
How does this affect small businesses?
However, this can create moral hazard—a party might have less incentive to prevent or mitigate a force-majeure event if they know they'll be excused from liability anyway. Courts and sophisticated parties often view these clauses with skepticism, particularly when one party's conduct was grossly negligent or intentional.