A Force Majeure Performance Credits clause addresses what happens when unforeseen, uncontrollable events (earthquakes, pandemics, wars, etc.) prevent a party from fulfilling contractual obligations. Rather than treating non-performance as a breach, this clause typically grants the affected party a "credit" or extension—meaning they get additional time to perform, reduced performance obligations, or suspension of penalties without being held in default. The clause essentially recognizes that some events are genuinely beyond anyone's control and shouldn't trigger liability. This matters because without it, a party could face breach damages even when circumstances made performance impossible through no fault of their own. However, the categorization as "confidentiality" here is unusual; force majeure typically belongs in performance/liability sections. If this clause somehow ties force majeure events to confidential information (e.g., protecting trade secrets during emergency disclosures), that would explain the categorization.
The practical impact is significant: force majeure clauses can mean the difference between a party owing millions in damages versus owing nothing, depending on how broadly or narrowly the clause defines qualifying events and what notice/mitigation steps are required.
When reviewing a force Majeure Performance Credits clause, carefully define what events qualify—don't accept vague language like "acts of God" without specificity. Require the affected party to provide prompt written notice and demonstrate they took reasonable steps to mitigate the impact. Include a time limit on how long the credit extends (e.g., 90 days maximum) and specify whether performance obligations are suspended, extended, or permanently reduced. If confidentiality is involved, clarify what information can be disclosed during emergencies and to whom. Consider whether pandemics, supply chain disruptions, or cyber-attacks are included, as these are increasingly common. Finally, ensure the clause doesn't become a loophole for poor planning—exclude events the party should have anticipated or insured against.
Frequently Asked Questions
What does this clause mean in simple terms?
A Force Majeure Performance Credits clause addresses what happens when unforeseen, uncontrollable events (earthquakes, pandemics, wars, etc.) prevent a party from fulfilling contractual obligations.
Why should I care about this clause?
Rather than treating non-performance as a breach, this clause typically grants the affected party a "credit" or extension—meaning they get additional time to perform, reduced performance obligations, or suspension of penalties without being held in default.
What are my options?
The clause essentially recognizes that some events are genuinely beyond anyone's control and shouldn't trigger liability.
How does this affect small businesses?
This matters because without it, a party could face breach damages even when circumstances made performance impossible through no fault of their own.