In the U.S. last year, Hurricanes Katrina and Rita powerfully demonstrated the ability of nature to disrupt companies’ operations and commitments. In a business context, the effects of such natural (or, for that matter, civil or social) disruptions can be felt up and down the hydrocarbon, petrochemical and other chemical-process supply chains, causing shortages, delays and allocations of material needed for processing and manufacturing.
When faced with or affected by disruptive situations, sellers or buyers commonly invoke “force majeure” to relieve themselves of contractual obligations, leaving the other party or parties to grapple with the consequences in order to assure continued production. (The paradox, however, is that most chemical-process companies are both sellers and buyers.) A clear understanding of the provisions, implications and workings of force majeure can help a production or plant-operations manager or engineer to make a disruption less damaging to the business than it otherwise would be.
What force majeure entails
Force majeure means “greater force.” In the situations we are discussing here, force majeure consists of a group of legal concepts that excuse performance of contractual duties when that performance has become impractical or impossible. In the U.S., there are three distinct concepts in force majeure law, which should be considered separately: contractual terms, the Uniform Commercial Code (UCC) provisions, and the common law.