Force majeure or commercial judgment?

Geopolitical instability is no longer a distant or occasional concern for businesses. It is an operational reality.

 

The renewed tensions between Iran and the United States are a clear example. Disruption across key shipping routes, heightened security risks, rising insurance premiums and longer transit times are feeding directly into global supply chains. For many businesses, the consequences are immediate: delayed deliveries, increased costs and growing pressure on contractual performance.

 

In response, we are seeing a marked increase in businesses considering and, in some cases, serving force majeure notices. But while the instinct to rely on contractual protections is understandable, the more important question is whether invoking force majeure is always the right strategic response.

 

 

When disruption becomes a contractual problem

The current instability in the Middle East is not just a macroeconomic issue; it is affecting the day-to-day mechanics of trade.

 

Shipping routes are being diverted, timelines extended, and costs inflated. Suppliers who previously operated on tight, predictable schedules are now dealing with uncertainty at multiple points in the logistics chain. That uncertainty quickly translates into contractual strain.

 

However, one of the most important and often misunderstood distinctions is this: disruption does not automatically entitle a party to relief.

 

From both a legal and commercial perspective, the key issue is whether performance has actually been prevented, or whether it has simply become more difficult, slower or more expensive. In many cases arising from the Iran–US tensions, it is the latter.

 

That distinction is not just technical. It goes to the heart of how risk is allocated in commercial contracts.

 

 

The force majeure question

Force majeure clauses are designed to deal with extraordinary events, and many will expressly refer to “war”, “hostilities” or “government action”. On the face of it, the current geopolitical situation may appear to fall squarely within that framework.

 

But invoking force majeure is rarely straightforward.

 

Businesses need to take a step back and consider a series of practical questions: 

• Has the conflict actually caused the failure to perform?
• Is performance truly impossible, or simply more expensive or logistically challenging?
• Are there alternative routes, suppliers or workarounds available?
• Have reasonable steps been taken to mitigate the impact? 

These questions are critical because force majeure is not triggered by the existence of a disruptive event alone. It depends on the specific impact of that event on the contractual obligation in question.

 

For example, delays caused by rerouting shipments or increased freight costs may not be sufficient where goods can still ultimately be delivered. Similarly, the availability of alternative suppliers, even at a higher cost, may undermine reliance on force majeure.

 

 

The risk of acting too quickly

In periods of uncertainty, there is a natural tendency to act decisively. Serving a force majeure notice can feel like a proactive step to protect legal position.

 

However, it is not without risk.

 

If the clause does not apply on the facts, the notice itself may trigger a dispute and expose the business to claims. In some cases, it can even be treated as a refusal to perform, with significant financial consequences.

 

There is also a broader commercial dimension. Supply chains are rarely purely transactional; they are built on ongoing relationships, trust and mutual dependency. Invoking force majeure can signal a shift from cooperation to confrontation at precisely the moment when flexibility is most valuable.

 

And importantly, force majeure is often only a temporary solution. While it may suspend obligations in the short term, prolonged disruption can lead to termination rights being exercised. That outcome may leave both parties in a weaker position, particularly where alternative arrangements are limited.

 

For many businesses, the more effective response lies in adopting a wider, more strategic toolkit. 

In practice, many organisations are engaging directly with counterparties to find pragmatic solutions. Adjusting delivery schedules, agreeing temporary price variations or sharing increased costs can preserve value and continuity on both sides.

 

Force majeure is not the only mechanism available. Price adjustment clauses, variation provisions and other flexibility mechanisms are often overlooked but can provide more targeted and less adversarial routes to relief.

 

Taking proactive steps to manage disruption, whether through alternative routes, substitute suppliers or operational adjustments, is not only a contractual expectation in many cases but also a key element of maintaining credibility and resilience.

 

One of the more complex challenges in the current environment is the misalignment of contractual risk across supply chains. A supplier may be able to rely on force majeure upstream, but that does not automatically relieve obligations downstream. Businesses operating in the middle of the chain can find themselves exposed, unable to perform, but still contractually liable.

 

Mapping and understanding that exposure is increasingly critical.

 

In some cases, the potential availability of force majeure can be used as a negotiating tool rather than an immediate course of action. Raising the issue can create space for constructive dialogue without escalating matters unnecessarily.

 

 

A question of strategy, not just entitlement

What the Iran–US conflict highlights is that force majeure is not a universal solution to disruption. It is a specific contractual mechanism that needs to be applied with care.

 

The more useful question for businesses is not simply “can we invoke force majeure?” but “should we?”

 

Answering that requires a broader assessment, one that considers legal position, commercial relationships, operational realities and long-term objectives.

 

In some situations, invoking force majeure will be the correct and necessary step, but in many others, a more measured approach, grounded in dialogue, flexibility and a clear understanding of risk, will lead to better outcomes.

 

 

Building resilience in a volatile world

If there is a wider lesson, it is that this type of disruption is unlikely to be an isolated event.

 

Geopolitical tensions, regulatory shifts and other global pressures are increasingly shaping the business landscape. As a result, resilience is no longer just about operational efficiency, it is about how contracts are structured and how risks are managed.

 

Businesses should be thinking proactively about: how force majeure clauses are drafted and triggered; whether contractual terms are aligned across their supply chains; and how much flexibility is built into both agreements and operations.

 

 

Striking the right balance

Ultimately, force majeure sits at the intersection of law and strategy.

 

Used appropriately, it can provide essential protection in genuinely disruptive circumstances. Used too quickly or without sufficient analysis, it can create additional risk, both legal and commercial.

 

In the current environment, the businesses best positioned to respond are those that take a balanced approach: protecting their legal position while remaining commercially pragmatic.

 

Because in a fractured and uncertain world, the strongest position is not always the most aggressive one, it is the most considered. 

 

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Yulia Barnes is Managing Partner at Barnes Law

 

Main image courtesy of iStockPhoto.com and MicroStockHub