This clause excuses a party from making payments when war, armed conflict, civil unrest, terrorism, riots, or similar violent upheaval makes payment impossible or illegal. For instance, if a country enters into war and freezes international bank transfers, a party owing payment cannot be held in breach for failing to transmit funds through blocked channels. In a payment context, this clause is critical because it addresses situations where the payment mechanism itself becomes unavailable—banks close, currency becomes worthless, or governments prohibit transactions with certain parties. Without this protection, a party could be forced into breach through no fault of their own when geopolitical events destroy the infrastructure necessary for payment.
The challenge with this clause is determining what constitutes sufficient "war and civil unrest" to excuse payment. Does a localized riot in one city excuse a multinational corporation's payment obligations? Does political instability or threat of conflict count, or only actual armed violence? Does the clause apply only when payment is literally impossible, or also when it becomes dangerous or illegal? Additionally, in payment obligations, there's a question of whether the clause excuses the payment entirely or merely suspends it until conditions normalize. A party might argue the debt is permanently forgiven, while the other party expects payment to resume once the conflict ends.
Define the triggering events with precision: specify that the clause applies only to war, armed conflict, civil unrest, or terrorism that directly prevents payment through normal banking channels or makes payment illegal under applicable law. Include a materiality threshold—the unrest must be substantial enough to genuinely obstruct payment, not merely create inconvenience or increase costs. Require the obligated party to provide prompt notice and evidence of the obstruction (such as bank closure notices or government payment prohibitions). Critically, clarify that the clause suspends payment obligations rather than canceling them, and specify that payment resumes within a defined period (e.g., 30 days) after normal conditions are restored. Consider whether the clause should include a termination right if payment cannot be made within a specified timeframe (e.g., 180 days), allowing the creditor to pursue other remedies rather than waiting indefinitely. For international contracts, specify which party bears currency risk if the payment currency becomes worthless or is replaced.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause excuses a party from making payments when war, armed conflict, civil unrest, terrorism, riots, or similar violent upheaval makes payment impossible or illegal. For instance, if a country enters into war and freezes international bank transfers, a party owing payment cannot be held in breach for failing to transmit funds through blocked channels.
Why should I care about this clause?
In a payment context, this clause is critical because it addresses situations where the payment mechanism itself becomes unavailable—banks close, currency becomes worthless, or governments prohibit transactions with certain parties. Without this protection, a party could be forced into breach through no fault of their own when geopolitical events destroy the infrastructure necessary for payment.
What are my options?
The challenge with this clause is determining what constitutes sufficient "war and civil unrest" to excuse payment. Does a localized riot in one city excuse a multinational corporation's payment obligations?
How does this affect small businesses?
Does political instability or threat of conflict count, or only actual armed violence? Does the clause apply only when payment is literally impossible, or also when it becomes dangerous or illegal?