When Rising Costs Don’t Trigger Force Majeure

Not everything that feels out of your control qualifies legally as Force Majeure. And in contracts, that distinction matters more than most expect.

A lawyer I was working with recently raised a situation that comes up more often than people expect.

The issue seemed straightforward at first.

Oil prices had increased significantly, and their client wanted to adjust the contract price as a result.

From a commercial perspective, this made complete sense. The cost base had shifted, margins were under pressure, and the situation felt clearly outside the party’s control.

But legally, the position was very different.

The Problem

The assumption was that this type of disruption could fall under a Force Majeure clause.

After all, the price increase was linked to broader geopolitical tensions affecting global energy markets.

However, under the relevant jurisdiction, this kind of price fluctuation was not considered a direct impact on the party’s ability to perform its contractual obligations.

The Legal Reality

This is where the distinction becomes critical.

Force Majeure is not about general commercial difficulty or increased cost.

It is about whether a party is prevented from performing its obligations due to a qualifying external event.

The contract may become less profitable. That is not the same as being unable to perform.

In many jurisdictions, even significant changes in market conditions — including sharp increases in raw material or energy costs — do not meet this threshold.

The contract may become less profitable.

It may even become commercially unattractive.

But that is not the same as being unable to perform.

A Common Misunderstanding

This creates a recurring gap between:

what feels like a valid justification in commercial terms
and what is actually recognised in legal terms

In this case, the client’s instinct was understandable.

But the clause did not provide the protection they expected.

Why This Matters in Practice

Situations like this are not rare, particularly in cross-border work where:

contracts are drafted in English
parties operate under different legal assumptions
and external events (such as geopolitical developments) affect pricing and supply chains

Explaining clearly why a Force Majeure clause does not apply can often be just as important as explaining when it does.

The real value often lies in managing expectations, not just interpreting clauses.

A Note on AI in This Context

Tools like AI can help review clauses and identify potential ambiguities or risks.

But they do not replace the need to understand how a clause will be interpreted in a specific legal and commercial context.

That distinction remains essential.

Final Thought

A situation can feel commercially disruptive — even severe — and still fall outside the legal definition of Force Majeure.

That gap between commercial reality and legal interpretation is where many misunderstandings arise.

And it’s often where clear communication matters most.

Not everything unpredictable is legally relevant. Knowing the difference is what defines good contract advice.

Legal notice: We are not a lawyers and do not provide legal advice. This content is for educational purposes only. Outputs generated by language models such as ChatGPT must be reviewed by qualified professionals before use.