Force Majeure Clauses in Minnesota After 2020

What does force majeure mean?

Force majeure is French for “superior force.” A force majeure clause is a contract term that excuses or suspends a party’s performance when an extraordinary event beyond the parties’ control, such as a natural disaster, war, strike, epidemic, or government order, prevents that party from performing. It allocates the risk of those events between the parties in advance, so neither one is liable for breach while the event lasts.

The definition has three working parts, and each one is a condition a party must meet before the clause helps it:

• An extraordinary event. The event has to be one the clause lists or one its catch-all reasonably reaches. Ordinary business risks (higher costs, a slow market, a weak supplier) are not extraordinary.
• Beyond the parties’ control. An event the invoking party caused, or could reasonably have avoided, does not qualify.
• It prevents performance. The event has to actually stop or delay the obligation, not just make it less profitable.

Those are the force majeure conditions courts look for, and the clause adds its own: written notice, mitigation, and limits on how long the excuse lasts. Each condition is covered below.

What did 2020 actually teach about force majeure clauses?

Three lessons emerged from the pandemic litigation wave that hit commercial leases, supply contracts, and service agreements:

1. Generic clauses with vague catch-all phrases failed more often than they succeeded. Courts construing a clause that listed acts of God, war, fire, and labor disputes were reluctant to read pandemic into the gap.
2. Parties that tried to invoke force majeure for economic loss rather than physical impossibility tended to lose on the causation question. Financial hardship is not the same as inability to perform.
3. Notice and mitigation requirements that looked like boilerplate turned out to be enforceable, and parties that skipped them lost the defense before the substantive argument was even reached.

In Minnesota supply and services contracts since 2020, the recurring drafting fights I have seen are about whether “epidemic” reaches a non-declared outbreak, and whether “government action” reaches an agency guidance document that is not a binding order. These are the kinds of definitional gaps an updated enumeration list closes.

The practical takeaway is that the force majeure clause should now be treated as a meaningful risk-allocation tool, not a stock paragraph. Every contract that exposes the company to material performance risk deserves a clause drafted for the specific deal, the specific industry, and the specific kinds of disruption that could actually disable performance.

How Minnesota law treats force majeure when the contract is silent

Minnesota has no general force majeure statute. For most commercial contracts (services, professional engagements, and most real-estate lease issues), force majeure exists only because the parties wrote it into their contract. Whether the clause applies, how it applies, and what relief it provides are all questions decided by reading the clause itself under standard Minnesota contract-construction rules. Statutes supply a default excuse only in the particular settings described below.

The most significant exception is the sale of goods. Article 2 of the Uniform Commercial Code, codified in Minnesota at Minn. Stat. § 336.2-615, provides a default excuse for sellers when performance has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made, or by compliance in good faith with a governmental regulation or order. Minn. Stat. § 336.2-615 reaches sale-of-goods contracts only, including a distribution agreement under which a supplier sells goods to a distributor; it does not extend to services, real-estate leases, or licensing.

Leases of goods and equipment are a separate carve-out. Minnesota has adopted UCC Article 2A, which contains its own excused-performance rules for goods leases at Minn. Stat. §§ 336.2A-405 and 336.2A-406. Parties to an equipment-lease agreement should read those provisions in tandem with any drafted force majeure clause; the statutory baseline can supplement or be supplemented by the clause depending on how the contract addresses it.

Real-property leases have one narrow statutory backstop. Under Minn. Stat. § 504B.131, a tenant or occupant of a building that is destroyed or becomes uninhabitable or unfit for occupancy through no fault or neglect of the tenant or occupant may vacate and surrender the building. A tenant may expressly agree otherwise, subject to limits in residential tenancies, so a commercial lease should say plainly what happens after a fire or storm.

For non-goods contracts outside any specific statutory regime, the written clause usually controls the analysis.

How do Minnesota courts read a catch-all phrase like “any other cause beyond reasonable control”?

Courts apply ejusdem generis, a general canon of contract interpretation that reads a catch-all in light of the specific items the parties chose to list. If a clause says “fire, flood, earthquake, war, riot, strike, or any other cause beyond the reasonable control of the parties,” the catch-all is read to cover events similar in kind to the enumerated list. A pandemic is not similar in kind to a fire or an earthquake. A government-ordered closure is not similar in kind to a strike. A supply-chain disruption caused by a foreign port shutdown is not similar in kind to a riot.

This is why pre-pandemic clauses failed when companies tried to read pandemic into the catch-all. The drafters had not contemplated the kind of disruption that arrived, and the canon of construction held them to the kinds of disruption they had actually listed.

The cure is not to delete the catch-all (it still has a useful role) but to expand the enumerated list so that the catch-all is read against a broader category of named events. A clause that names “epidemic, pandemic, public health emergency, government-ordered closure, embargo, sanction, and cyberattack” alongside the traditional events gives the catch-all a much wider reach when the next unanticipated event lands.

What events should a 2026 force majeure clause specifically name?

A modern enumeration list should reflect both the traditional categories and the disruption categories that have surfaced in the last decade. The traditional events still belong in the clause: acts of God, fire, flood, earthquake, hurricane, war, terrorism, riot, strike, and labor dispute. The post-2020 additions are equally important: epidemic, pandemic, public health emergency, government-ordered closure or shelter-in-place order, embargo, trade sanction, export-control restriction, cyberattack, ransomware event, internet or utility outage, and material disruption of common-carrier transportation.

Industry-specific risks deserve specific naming. A construction contract should name unusual or extreme weather measured against an objective standard. A SaaS agreement should name third-party cloud-infrastructure outages and DDoS attacks. A manufacturing supply agreement should name plant-specific events like equipment failure caused by a force majeure at a critical upstream supplier. The more specific the list, the less room there is to argue later that the disruption fell outside the clause.

Utility service interruptions: a utility contract strategy

Power, water, gas, and telecommunications outages are some of the most common reasons a business cannot perform, and they come from two sources: natural disasters (storms, floods, ice, wildfire) and infrastructure failures (aging equipment, a substation fault, a demand surge the grid cannot carry). Whether you buy utility service, sell it, or run a business that depends on it (a data center, a cold-storage warehouse, a manufacturer), the contract should allocate outage risk on purpose rather than leave it to a one-word “utility outage” entry.

A sound strategy for a utility or utility-dependent service contract covers five points:

1. Which outages count. Name the outage events: interruption of power, water, gas, or telecommunications service by the public utility or provider, and say whether an outage at your own facility from your own equipment counts (it should not).
2. Planned maintenance stays outside the clause. Treat scheduled maintenance as scheduled downtime with its own advance-notice period and time window, not as force majeure.
3. A restoration timeline. Require the affected party to restore service, or switch to backup power or an alternate site, within a stated time, and say what happens if it does not.
4. Backup and redundancy duties. If a party promised a generator, a second carrier, or a failover site, say that the clause does not excuse an outage the backup should have covered.
5. Credits and termination. Service-level credits during a long outage, and a right to terminate if service is not restored within a stated period, give both sides a defined landing.

Can a utility provider invoke force majeure for planned maintenance?

Generally not. Planned maintenance is scheduled in advance by the provider itself, so it is within the provider’s control, which is the opposite of the “beyond reasonable control” condition every clause requires. A service agreement should still say so expressly and give planned maintenance its own rules: advance notice, maintenance windows, and limits on total downtime. An emergency repair after a storm is different, because the storm, not the provider’s calendar, caused it.

What documentation proves a force majeure event?

Keep a record that shows the event, its timing, and how it stopped performance: the utility’s outage notice or restoration report, government orders or emergency declarations, weather service data, photographs, and your own written notices and updates to the other party. Write down what you did to work around the disruption. In a dispute, expect to have to prove that the event caused the failure and how much of it, as the strike case discussed below shows; these records are that proof.

Sample force majeure clause for a service agreement

Here is a sample force majeure clause for a service agreement, written to reflect the points in this article. Treat it as a starting point: the event list, notice period, and termination period should be fitted to your deal, your industry, and the governing law.

Force Majeure. (a) Definition. “Force Majeure Event” means an event beyond the reasonable control of the affected party that prevents or delays its performance under this Agreement, including: acts of God; fire, flood, earthquake, tornado, ice storm, or other severe weather; epidemic, pandemic, or public health emergency; war, terrorism, riot, or civil disorder; government order, embargo, or sanction; strike, lockout, or other labor dispute, other than one involving only the affected party’s own employees; cyberattack; and interruption of electrical, telecommunications, or internet service by a third-party provider. Force Majeure Events do not include: changes in market conditions or cost; the affected party’s lack of funds, insolvency, or bankruptcy; the insolvency or bankruptcy of the affected party’s vendors or subcontractors; shortages of labor; or planned maintenance.

(b) Notice. The affected party must give written notice to the other party under the Notices section within five business days after learning of the Force Majeure Event, describing the event, the obligations affected, and the expected duration, and must update the other party every ten business days until the event ends.

(c) Effect; mitigation. The affected party’s performance is excused only to the extent and for the period that the Force Majeure Event prevents it, provided the affected party uses commercially reasonable efforts to mitigate the event’s effects, including through backup systems and alternate means of performance. Fees for services not performed are not payable for that period.

(d) Exclusions. This Section does not excuse any obligation to pay money already due, or any obligation of confidentiality, data security, or compliance with law.

(e) Termination. If a Force Majeure Event prevents substantially all performance for more than 60 consecutive days, either party may terminate this Agreement on written notice without liability for that termination.

What do Minnesota courts actually require to trigger the clause?

Beyond fitting the list, the party invoking force majeure has to show three things: that the event actually prevented performance (causation), that the event was not within the invoking party’s reasonable control, and that the invoking party complied with any notice and mitigation requirements the contract imposed.

Causation is where most invocations fail. Courts distinguish between an event that prevents performance and an event that makes performance more expensive or less profitable. A supplier whose costs doubled because of a tariff is not prevented from performing; a supplier whose plant is condemned by a government order is. The clause should be drafted with this distinction in mind, and the party invoking it should be ready to document the actual mechanism of disruption.

Reasonable control is fact-specific but generally requires that the event be external to the invoking party’s choices. A supplier who chose a single-source upstream vendor and then lost supply when that vendor failed cannot easily claim force majeure if a reasonable alternative was available. A manufacturer whose plant is shut down by a regulator for the manufacturer’s own safety violations cannot claim force majeure for the closure.

Notice and mitigation are addressed below as their own topic, because they carry independent enforcement weight and are commonly missed in practice.

How do force majeure, impossibility, and frustration of purpose differ in Minnesota?

These three concepts are often blurred together but are doctrinally distinct, and the distinction matters when the contract is silent or the clause does not reach the disruption.

Force majeure is contractual. It exists only because the parties wrote it. It excuses performance on the terms the contract specifies, usually with notice, mitigation, and a defined excuse period.

Impossibility is a common-law doctrine that excuses performance when an event the promisor had no reason to know of at signing makes performance impossible (the subject matter is destroyed, a key person dies, performance becomes illegal). Minnesota does not limit the doctrine to literal impossibility: performance may also be excused when it becomes impracticable because it would impose an excessive or unreasonably burdensome hardship, loss, or expense. The bar is still high: mere difficulty or subjective inability is not enough.

Frustration of purpose is a related common-law doctrine that excuses performance when a supervening event substantially destroys the principal purpose of the contract, even though performance remains technically possible. It is rarely invoked successfully in Minnesota because courts read the doctrine narrowly.

In SVAP III Riverdale Commons LLC v. Coon Rapids Gyms, LLC, A20-1593 (Minn. Ct. App. 2021), a commercial fitness-center tenant tried to defend a nonpayment-of-rent eviction by invoking impossibility and frustration of purpose, arguing that a state executive order had closed gyms during the COVID-19 emergency. The Court of Appeals held that impossibility and frustration of purpose were not available defenses in that nonpayment eviction proceeding under the governing eviction statute. The court did not decide whether those doctrines could be raised in a separate damages action, but the lesson for tenants and landlords is the same: do not rely on the common-law fallback to defeat an eviction. Build the protection into the lease itself.

The broader lesson is that drafting a force majeure clause beats relying on the common-law doctrines, every time. The clause is enforced on its own terms; the common-law doctrines are gatekept by judicial reluctance.

What notice and mitigation language belongs in the clause?

Notice and mitigation provisions are the parts of the force majeure clause most often skipped during invocation, and skipping them is one of the most common ways to lose the defense. A modern clause should require:

• written notice to the other party within a defined and short time after the invoking party learns of the event;
• a description of the event, the affected obligations, and the expected duration;
• ongoing updates as the disruption evolves;
• reasonable efforts by the invoking party to mitigate the effect, including pursuing alternative means of performance where commercially reasonable;
• a defined right for either party to terminate the contract if the disruption exceeds a stated duration; and
• an allocation of who bears the cost of mitigation efforts.

These provisions also serve a documentation function. If litigation follows, the notices, updates, and mitigation records are the evidence that supports (or undermines) the invocation. Skipping the contractually required notice can give the other party a threshold argument against the defense before the merits are reached. In counseling Minnesota clients through invocation decisions, the most common failure mode is a phone call or email mention to a counterparty that does not match the contract’s notice section: wrong addressee, wrong delivery method, or no written description of the affected obligations. That mismatch then becomes the opposing party’s first argument months later.

How does force majeure interact with sale-of-goods contracts under the UCC?

When the contract is for the sale of goods, the analysis runs through Article 2 of the Minnesota UCC even if the parties also wrote a force majeure clause. Minn. Stat. § 336.2-615 supplies a default seller-side excuse: delay or nondelivery is not a breach when performance has been made impracticable by a basic-assumption contingency or by compliance in good faith with a foreign or domestic governmental regulation or order, whether or not it later proves invalid. The seller must allocate fairly among customers if the disruption affects only part of capacity, and must give seasonable notice to the buyer of the delay or nondelivery and any allocation made.

The buyer’s side of the equation is governed by Minn. Stat. § 336.2-616, which gives the buyer the right (after receiving notice of a material or indefinite delay or an allocation) to terminate the affected portion of the contract or to modify by agreeing to take the available quota. Minn. Stat. § 336.2-616 requires the buyer to make that election by written notice to the seller, and the contract lapses as to the affected deliveries if the buyer does not modify it within a reasonable time not exceeding 30 days after receiving the seller’s notice. The parties cannot negate that rule by agreement, so a buyer who receives a force majeure notice should respond in writing within the statutory window rather than wait for a longer contract deadline.

The interaction question for a goods contract is whether the force majeure clause supersedes or supplements § 336.2-615. The parties can contract around § 336.2-615 by writing a more specific clause, but they cannot contract out of § 336.2-616 to the buyer’s detriment. A well-drafted goods contract addresses both layers explicitly: it defines the force majeure events for the deal, and it states whether the parties intend the contract clause to displace, supplement, or merely interpret the UCC default. Companies negotiating long-term supply agreements should treat both the clause and the UCC backstop as part of the same risk allocation.

What carve-outs should always be excluded from force majeure?

Some obligations should never be excused by force majeure, regardless of the disruption. The carve-outs section of a modern clause should expressly exclude:

• the obligation to pay money that was already due before the event began;
• confidentiality, intellectual property, and data security obligations;
• indemnification obligations for events that occurred before the disruption;
• compliance with applicable law (an event cannot license a party to violate the law); and
• any obligation that the contract elsewhere makes a condition of payment or termination.

These carve-outs prevent the clause from becoming a general escape hatch and keep it focused on its proper role: temporary excuse of operational performance during a discrete disruption. The carve-outs interact with the rest of the contract’s risk-allocation architecture, particularly the indemnification and limitation of liability provisions, and the three clauses should be drafted as a coherent set rather than three independent paragraphs. For contract types that depend on a written instrument to be enforceable in the first place, see also our overview of the Minnesota statute of frauds.

Force majeure and labor strikes

A strike is one of the oldest force majeure events, and “strike” and “labor dispute” appear in most clauses. A force majeure strike claim still fails more often than a flood claim, because strike action is a human event that a party can sometimes foresee, influence, or work around.

What labor events should a strike clause cover?

Strike language should name each labor event it means to cover, because a court reads the list:

• Strikes: a work stoppage started by employees.
• Lockouts: a work stoppage started by the employer. Many clauses name lockouts expressly, and a party that locks out its own workforce should expect the other side to argue the stoppage was within its control.
• Picketing: a protest at or near a site that blocks deliveries or keeps other workers from crossing.
• Sympathy strikes and secondary actions: a stoppage by workers who support another union’s dispute, often at a carrier, port, or supplier rather than at either party.
• Slowdowns and work-to-rule actions: reduced output short of a full stoppage. A clause that excuses only a “strike” may not reach a slowdown.

How to draft an effective labor strike clause

The common contractual language (“strikes, lockouts, or other labor disputes”) leaves four questions open. Answer them in the clause:

1. Whose workforce? Say whether a strike by the invoking party’s own employees counts. Buyers often limit the clause to strikes at third parties, such as carriers, ports, and suppliers, or to industry-wide strikes, because a party’s own labor relations are partly within its control. A seller with a unionized workforce will want its own strikes covered.
2. Local or industry-wide? Decide whether a strike at one plant qualifies or only a regional, national, or industry-wide strike. Geographic scope belongs in the clause.
3. Known expiration dates. If a collective bargaining agreement expires during the contract term, a strike at that point is foreseeable. Either name it as covered or say that the clause does not cover strikes when a labor contract expires.
4. Duty to settle. Clauses often state, as the clause in the Aquila case below did, that the clause does not require a party to prevent, settle, or otherwise end a strike. Without that sentence, the other side may argue that mitigation required giving in to the union’s demands.

Pair those answers with the clause’s notice, mitigation, and termination terms, so a long strike ends in a defined exit rather than an open-ended suspension.

How do labor strikes differ from other force majeure events?

A strike differs from a natural disaster in three ways that matter in a dispute. Its origin is human: employees acting collectively, sometimes in response to the employer’s own decisions. It is often foreseeable, because labor contracts have expiration dates and negotiations are public. And it is partly controllable, because the employer can bargain, bring in replacement capacity, or shift work to another site. A party claiming a strike as force majeure should expect closer questions about foreseeability and mitigation than a party claiming a tornado.

Can force majeure apply to a strike already underway when the contract was signed?

Rarely, unless the contract says so. A force majeure clause covers events that interfere with performance after the contract is signed, and a strike already in progress when you sign is a known condition, not an unforeseen event. If you must sign during a strike, address it directly: name the strike, state its expected effect on delivery dates, and agree on adjusted deadlines or a termination right if it continues past a stated date.

Labor strike clauses in action: the Aquila coal-supply case

Aquila, Inc. v. C.W. Mining, 545 F.3d 1258 (10th Cir. 2008) shows both how a strike clause works and how a strike claim can still fail. A Utah coal mine agreed to supply coal to Aquila, a public utility. The contract’s force majeure clause defined force majeure as “any and all causes beyond the reasonable control of the party failing to perform,” including “labor disputes; boycotts; lockouts; labor and material shortages,” and it stated that the section “shall not be construed to require either party to prevent, settle or otherwise avoid or terminate a strike.” Less than a week after the contract was signed, a strike hit the mine, and the dispute “lingered unresolved for over two years.”

The mine gave written notice that it considered the labor dispute a force majeure event, but the trial court found that “geological, not labor, problems were the primary force inhibiting CWM’s performance,” and the mine never notified Aquila in writing that it considered the geological problems force majeure. The Tenth Circuit, applying Missouri law, agreed that the clause covered a partial force majeure, but held that the mine’s performance could be excused “only to the extent that the partial force majeure – here, the labor dispute – caused the deficiency.” Because the mine offered no evidence of how much of the shortfall the strike caused, the court affirmed a judgment of more than $24 million against it.

Two lessons follow. A strike clause excuses only the part of the shortfall the strike caused, so document the strike’s effect on output separately from every other problem. And give written notice of every event you intend to rely on, not just the first one.

How does labor strike insurance work alongside force majeure clauses?

The two do different jobs. A force majeure clause excuses your performance to the other party; it pays you nothing. Strike or business-interruption insurance, where you can buy it, reimburses your own lost income or extra expense. Coverage turns entirely on the policy’s terms, including what triggers it, its exclusions, and its waiting period, so read the policy alongside the contract. A force majeure clause neither creates nor removes insurance coverage.

What industries are most affected by labor strike force majeure clauses?

Strike risk is highest where work depends on a unionized or concentrated workforce: transportation and logistics (rail, trucking, ports, and airlines), manufacturing, construction, mining and energy, healthcare, hospitality, and entertainment production. Businesses that buy from those industries carry the risk too, because a port or carrier strike delays their deliveries even though their own employees never walk out.

How do international labor laws affect strike-related force majeure clauses?

In a cross-border contract, the law of the country where the work happens decides whether a strike is lawful, how long it can last, and what the employer may do in response, and the contract’s governing law decides how the clause is read. For international sales of goods, the treaty discussed below in the section on jurisdictions supplies its own exemption rule when the contract does not displace it. Name the governing law, define covered labor events precisely, and say whether strikes in a particular country or at a particular supplier qualify.

Are there alternative dispute resolutions for labor strike force majeure claims?

Yes. A contract can require the parties to mediate a disputed force majeure invocation, and then to arbitrate it if mediation fails. Minnesota enforces arbitration agreements: under Minn. Stat. § 572B.06(a), “[a]n agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of contract.” Mediation is useful during a strike, because the parties often want to keep the relationship and agree on revised delivery dates; arbitration gives a faster, private decision when they cannot agree. Write the dispute-resolution step into the contract before a strike begins.

Do labor shortages count as force majeure?

Generally not, unless the clause names them. A labor shortage (not enough qualified workers to staff the job) is an operational risk the performing party is expected to plan for. Labor shortages, employee mistakes, and malicious acts by your own staff are examples of internal operational risks within a business’s own sphere of control, not external events of the kind a force majeure clause addresses. A catch-all phrase is read against the listed events, as explained above, and a general staffing shortage is not similar in kind to a flood or a war.

Why do force majeure clauses exclude labor shortages?

The common reasons for excluding labor shortages are practical. Labor markets move in cycles that businesses can see coming. Workforce changes, such as retirements and shifting skills, are a normal planning problem. And the performing party controls its own hiring, pay, training, and scheduling, so it is the party best able to manage the risk. Many clauses therefore list “shortages of labor” among the events that do not qualify, to prevent any argument that a hiring problem fits the catch-all.

The Aquila clause, discussed above, took the opposite approach: it named “labor and material shortages” as force majeure. That shows a party can negotiate shortage coverage, and that even with it, the invoking party must prove how much of its shortfall the shortage caused.

How does excluding labor shortages allocate contractual risk?

Leaving labor shortages out of the clause, or excluding them expressly, keeps workforce risk on the party that has to perform. If you cannot staff the job, you remain liable for late or missed performance. That is a deliberate risk allocation: the party that controls the workforce bears the risk of not having one.

What is the impact on business operations during a workforce crisis?

When a labor-shortage exclusion applies, a staffing crisis is not a defense. A business that misses deadlines because it cannot hire faces breach of contract claims, liquidated damages, service-level credits, or termination, on top of the operating strain of the shortage itself. During a broad workforce crisis, such as a regional shortage of skilled trades, many businesses discover this at once. The practical response is to negotiate protection before signing and to plan staffing as part of the bid.

What are the alternatives to force majeure for managing labor risks?

If you cannot get labor shortages into the force majeure clause, negotiate other protection tied to staffing:

• Schedule extensions for documented, industry-wide labor shortages, without excusing performance altogether.
• Price adjustment or escalation clauses tied to a published wage index, so higher labor costs do not wipe out the margin.
• Termination rights if staffing levels fall below a stated threshold for a stated period, with a defined wind-down.
• Subcontracting rights that let you bring in outside capacity without the other party’s consent.

Inside the business, cross-training, staffing-agency relationships, retention programs, and automation reduce the chance you need any of these.

Which industries exclude labor shortages, and which are most affected?

Construction, hospitality, healthcare, manufacturing, and agriculture and food processing are most exposed, because their output depends directly on available workers and deadlines rarely move. Owners and buyers in those industries routinely insist on excluding labor shortages, because a contractor or supplier that cannot staff a project is exactly the risk they are trying to shift. Construction contracts often tie schedule relief to defined delay events rather than to staffing; hospitality and healthcare contracts focus on minimum staffing and service levels.

How do labor shortages affect international supply chain contracts?

A labor shortage at a foreign factory, port, or carrier can delay a whole supply chain, and the buyer at the end usually has no direct contract with the party that is short of workers. Your supplier’s delivery obligation to you stands unless your contract with it excuses the delay. If you buy or sell internationally, address upstream labor disruptions in the clause, say whether a sub-supplier’s shortage counts, and require prompt notice so you can source elsewhere. The international sales treaty discussed below treats a supplier’s failure as an excuse only in narrow circumstances.

Can labor shortage exclusions influence insurance policy claims?

Only indirectly. Your insurance coverage turns on the insurance policy’s own terms, not on the supply contract’s force majeure exclusion. The exclusion decides whether you are liable to your customer; the policy decides whether your insurer pays for your loss or your liability. Read both, and do not assume a policy covers a liability the contract assigns to you.

How do force majeure labor exclusions interact with government labor laws?

A labor-shortage exclusion does not change what employment law requires, and a shortage does not excuse compliance with it. If you cover a shortage with overtime, overtime law applies. Federal law, at 29 U.S.C. § 207(a)(1), bars covered employers from employing an employee “for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” Minnesota’s own statute, Minn. Stat. § 177.25, subd. 1, provides that “[n]o employer may employ an employee for a workweek longer than 48 hours, unless the employee receives compensation for employment in excess of 48 hours in a workweek at a rate of at least 1-1/2 times the regular rate.” Build that cost into your pricing, and keep the clause’s carve-out that no event excuses compliance with law.

Are there tax implications related to clauses excluding labor shortages?

The clause itself creates no tax. The tax questions come from the money that changes hands when a labor-shortage exclusion leaves you in breach. Under 26 U.S.C. § 162(a), “[t]here shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Section 162(f) denies a deduction for amounts paid “to, or at the direction of, a government or governmental entity in relation to the violation of any law,” so a government fine is treated differently from damages paid to a customer. Have your tax advisor confirm the treatment of any significant damages, credits, or settlement payment in the year it is paid.

Force majeure clauses do not cover vendor bankruptcy

A force majeure clause does not protect you when a vendor or supplier goes bankrupt, unless it names insolvency expressly, and most clauses should not. Insolvency is a financial condition, and the financial health of a vendor you chose is something you can investigate and monitor.

Why is vendor bankruptcy excluded from force majeure?

Four reasons keep vendor bankruptcy outside the clause. It is foreseeable through due diligence and credit monitoring. It is a financial risk, and the clause addresses external events that physically prevent performance. Bankruptcy has its own legal framework, federal bankruptcy law, that governs what happens to the vendor’s contracts. And a dedicated insolvency provision handles the risk better than a force majeure clause can.

How are bankruptcy claims under force majeure clauses interpreted?

A clause that does not list bankruptcy or insolvency will not reach it through the catch-all. The catch-all is read against the listed events, as explained above, and a vendor’s insolvency is not similar in kind to a fire, a flood, or a war. The same reasoning keeps a party’s own lack of funds outside the clause, as covered in the FAQ below. If the contract does name insolvency, define it: say whether it means only a formal bankruptcy filing or also an assignment for the benefit of creditors, a receivership, or an inability to pay debts as they come due.

What happens when a vendor files for bankruptcy?

Your contract does not end, and your own obligations continue. Federal bankruptcy law then controls the vendor’s side of the contract. Under 11 U.S.C. § 365(a), “the trustee, subject to the court’s approval, may assume or reject any executory contract or unexpired lease of the debtor.” If the contract is assumed, the vendor (or a buyer of its business) keeps performing; if it is rejected, section 365(g) treats “the rejection of an executory contract” as “a breach of such contract,” which leaves you with a damages claim against the vendor’s bankruptcy estate rather than continued performance.

Section 365(e)(1) also limits a common drafting move. It provides that an executory contract “may not be terminated or modified, and any right or obligation under such contract or lease may not be terminated or modified, at any time after the commencement of the case solely because of a provision in such contract or lease that is conditioned on” the debtor’s “insolvency or financial condition,” the bankruptcy filing itself, or the appointment of a trustee or custodian. Section 365(e)(2) carves out narrow exceptions, including loan and financing contracts. In practice, a clause letting you terminate “if the vendor files for bankruptcy” generally cannot be enforced after the filing, which is the moment you need it. Protection works best before a filing: early warning, a termination right tied to performance and financial covenants you can use while the vendor is still solvent, and security that does not depend on the vendor.

What are the risks of relying on force majeure for vendor bankruptcy?

Treating force majeure as insolvency protection creates four risks. You face a dispute you will likely lose, because the clause does not reach the event. You stop watching the vendor’s financial health because you think you are covered. You remain exposed to your own customers when your supply stops, because your contract with them does not excuse you either. And you delay lining up an alternate source until the vendor has already failed.

How should contracts address vendor bankruptcy?

Use provisions built for supplier insolvency:

• An express statement that a vendor’s or subcontractor’s insolvency is not force majeure, so no one argues otherwise.
• Financial-distress disclosure and reporting. Require the vendor to deliver periodic financial statements and to notify you promptly of a missed loan payment, a covenant default, a material lawsuit, or a decision to seek bankruptcy protection.
• Termination rights you can use early. Tie a termination right to performance failures, missed financial covenants, or a failure to provide adequate assurance of performance, so you can act before a filing.
• Performance security. A performance bond, a letter of credit, a parent guaranty, or an escrow of source code, tooling, or materials gives you something of value that does not depend on the vendor staying solvent.
• Step-in rights. Let you take over the work, or appoint a substitute vendor, using the vendor’s specifications, tooling, and records, when the vendor stops performing.
• Transition assistance. Require the vendor to help move the work to a replacement, at stated rates.
• A second source. For critical supply, qualify a second vendor before you need one.

For more on what happens on the other side of the case, see the bankruptcy overview of chapter 11 reorganizations.

How does a force majeure clause differ across jurisdictions?

Force majeure is mainly a creature of contract in the United States, so the governing-law clause decides which state’s rules read it. Each state applies its own contract-interpretation rules, so the same clause can be read differently from one state to the next. A Minnesota business signing a contract governed by another state’s law should have the clause read under that state’s cases, not Minnesota’s.

Outside the United States the differences are larger. Other countries’ laws carry their own rules on excused performance, and those rules differ from Minnesota’s in wording and in remedy. For international sales of goods, the United Nations Convention on Contracts for the International Sale of Goods (CISG) applies to “contracts of sale of goods between parties whose places of business are in different States . . . when the States are Contracting States.” Its Article 79(1) provides: “A party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it, or its consequences.” When the failure is that of “a third person whom he has engaged to perform the whole or a part of the contract,” Article 79(2) exempts the party only if both it and that third person would be exempt, and Article 79(4) requires notice of the impediment. Under Article 6, “[t]he parties may exclude the application of this Convention,” so an international contract should state whether the CISG applies and should carry its own force majeure clause either way.

A clause worth the paragraph it occupies

The pandemic exposed how casually most American businesses had treated their force majeure language. Five years later, the businesses that have rewritten their clauses with specific events, a working notice procedure, real mitigation requirements, and clean carve-outs are in a measurably stronger position than the ones still relying on a 1990s form.

A force majeure clause is not insurance, but it is the closest the contract gets to a controlled landing when something genuinely outside the parties’ control disrupts performance. The drafting work that goes into a strong clause is small compared to the cost of arguing about a weak one in the middle of a crisis.

If a Minnesota business is reviewing its standard contract suite for 2026, the force majeure paragraph is one of the places where revision yields the highest return. Our Minnesota business contract attorney team works with clients on exactly that kind of clause-by-clause modernization.