Force Majeure Memos: Our Own “Waffle House Index”

Key Takeaways

• Faegre Drinker memo warns of Iran conflict force majeure risks
• Parties will argue narrow vs broad FM clause constructions
• Broad FM clauses may allow termination for war-related disruptions
• Mitigation steps essential to avoid contract breaches
• MAC clauses can serve as alternative relief mechanisms

Pulse Analysis

The resurgence of geopolitical tension between the United States and Iran has thrust force majeure clauses into the spotlight for multinational companies. While FM provisions have long served as a safety valve for unforeseen events, the memo from Faegre Drinker illustrates how the specific language of these clauses can dictate whether a party can merely suspend performance or walk away entirely. Legal teams must now scrutinize the definition of "war" or "armed conflict" and assess whether notification and mitigation requirements are clearly met, because courts will weigh the precision of contractual drafting against the magnitude of the disruption.

Beyond the binary of narrow versus broad FM interpretations, the memo underscores the strategic value of material adverse change (MAC) clauses as a complementary shield. MAC language often captures a broader spectrum of economic shocks, allowing parties to invoke relief even when FM triggers are ambiguous. Companies should therefore conduct a clause‑by‑clause audit, aligning FM and MAC provisions with realistic risk scenarios and ensuring that escalation procedures are actionable. This dual‑layered approach can reduce the likelihood of costly litigation and preserve critical supplier relationships during prolonged conflict.

Practically, the memo recommends immediate steps: map supply‑chain dependencies, document all mitigation efforts, and establish clear communication protocols for invoking FM or MAC rights. Executives should also consider insurance products that cover war‑related losses and negotiate contractual carve‑outs for specific sanctions regimes. By proactively tightening contractual language and reinforcing operational resilience, firms can transform a potential legal disaster into a manageable risk, protecting both revenue streams and brand reputation in an increasingly volatile global environment.