Force Majeure Clauses In New Zealand: Meaning For Business Contracts

If you run a small business, you've probably signed (or sent) a contract that includes the words "force majeure". It often sits near the back of the agreement - and it's easy to gloss over until something goes wrong.

But when the unexpected happens (think supply chain disruptions, natural disasters, pandemics, cyber incidents, or sudden law changes), your force majeure clause can become one of the most important parts of your contract.

In this guide, we'll break down what a force majeure clause really does in New Zealand, how it's different from "frustration", and what you can do to make sure your contracts actually protect your business - not just look good on paper.

What Does "Force Majeure" Mean In A Business Contract?

"Force majeure" is a legal term (originally from French) that usually means an extraordinary event outside a party's reasonable control that prevents them from performing their obligations under a contract.

In practical terms, a force majeure clause is the part of your contract that answers questions like:

• What happens if you can't deliver because your supplier's factory shuts down?
• What happens if your premises are damaged by a flood or earthquake?
• What happens if a new government restriction suddenly makes your service illegal (or impossible) to provide?
• Do you still have to pay? Can you pause the contract? Can you terminate it?

Here's the key thing many business owners miss: force majeure isn't a "standard right" that automatically applies. It's mostly a contractual concept, meaning your rights and obligations depend heavily on how your clause is drafted.

That's why it's worth understanding the moving parts - especially if you're the one issuing the terms to customers, suppliers, or commercial partners.

If you're setting up agreements from scratch, it helps to first understand what makes a contract legally binding, because force majeure only matters if the underlying contract is enforceable in the first place.

When Can You Rely On A Force Majeure Clause In New Zealand?

Even if your contract includes the word "majeure", you can't automatically "activate" it just because something difficult happens.

Most force majeure clauses require you to show:

• A qualifying event occurred (as defined in the clause - for example "earthquake", "epidemic", "act of government", "war", "labour strike").
• The event was outside your reasonable control.
• The event prevented performance (not merely made it harder, slower, or less profitable).
• You took reasonable steps to avoid or mitigate the impact (for example, sourcing alternatives where possible).
• You complied with any notice requirements (many clauses require notice "as soon as practicable" or within a stated timeframe).

"Prevented" vs "Hindered" vs "Delayed" (And Why It Matters)

One of the biggest drafting issues we see is unclear thresholds. Some clauses say you can claim force majeure if performance is "prevented". Others include broader language like "hindered", "delayed", or "materially affected".

From a business perspective:

• "Prevented" is usually a higher bar (closer to "impossible").
• "Hindered" or "delayed" can be broader and may capture situations where performance is still possible, but significantly disrupted.

This difference can decide whether you're entitled to pause obligations (or whether you're still in breach and potentially exposed to damages).

Notice Requirements Are Often Deal-Breakers

Many small businesses focus on the event itself and forget the process. But if your clause requires notice within (say) 5 business days and you don't give it, you may lose the protection.

If your contracts are operationally complex, it can help to define "business day" properly so deadlines aren't ambiguous - especially when weekends and public holidays are involved. (For example, see how "business day" is often treated in commercial drafting: business day.)

What Relief Does A Force Majeure Clause Usually Provide?

Force majeure clauses vary, but most are designed to allocate risk and give a clear plan when an unexpected disruption happens.

Common outcomes include:

• Suspension of performance: one or both parties can pause obligations while the event continues.
• Extension of time: deadlines are moved out (for example, delivery dates or project milestones).
• Temporary excuse from liability: the affected party isn't liable for breach during the force majeure period (as long as they comply with the clause).
• Termination right: if the event continues beyond a defined period (for example, 30/60/90 days), one or both parties may end the contract.
• Cost allocation rules: the clause may deal with who pays what for work already completed, unavoidable costs, deposits, or cancellation fees.

Because the practical result can be termination (or a long pause), your force majeure clause often overlaps with the rest of your contract's "exit" mechanics - including default, termination, and dispute resolution. It's worth checking that your termination provisions align with your majeure wording, including how notices must be served and whether any cure periods apply.

If you're looking at ending a commercial arrangement, it's also useful to understand the broader picture of terminating a contract, because force majeure is only one pathway to an exit.

Force Majeure vs Frustration In New Zealand (They're Not The Same)

A lot of business owners assume that if a contract doesn't have a force majeure clause, they're stuck no matter what. That's not always true - but the alternative isn't simple, and it can be risky to rely on without advice.

In New Zealand, if a contract becomes impossible (or radically different from what the parties agreed) due to an unforeseen event, the contract may be considered "frustrated" under the common law doctrine of frustration.

If a contract is frustrated, it generally comes to an end automatically (it's not just paused). Then, the question becomes: what happens to money paid, costs incurred, or work completed?

New Zealand also has specific legislation that can apply where a contract is frustrated - the Contract and Commercial Law Act 2017 includes rules that may allow the court to adjust rights and obligations (for example, around money paid or payable and expenses incurred). However, frustration disputes are often fact-specific and can be expensive to argue about after the event.

So from a practical small business perspective:

• Force majeure is usually the safer "plan ahead" tool because it gives a process and agreed outcomes.
• Frustration is more of a "last resort" legal doctrine when the contract doesn't cover what happened.

Why This Matters For Small Businesses

Imagine you run a caf? and you sign a supply agreement for a specific imported product. A sudden regulatory change blocks the import. If your agreement includes a well-drafted majeure clause, you may be able to pause deliveries, source alternatives, or terminate after a set time.

If there's no clause, you might end up in an argument about whether the contract is frustrated - and in the meantime you still need stock, you still have customers, and you still have bills to pay.

This is exactly why it's worth treating your contracts as part of your business "infrastructure", not an afterthought.

What Should A Strong Force Majeure Clause Include For Your Business?

There's no one-size-fits-all force majeure clause. A clause that works for a construction business may be totally inappropriate for a SaaS provider or an ecommerce brand.

That said, most strong force majeure clauses include the following building blocks.

1) A Clear Definition Of Force Majeure Events

Many contracts list examples. The key is to ensure the list matches the real risks in your industry.

Common examples include:

• earthquakes, floods, fires, storms, and other natural disasters
• pandemics, epidemics, public health emergencies
• acts of government (for example, lockdown orders or import/export restrictions)
• war, terrorism, civil unrest
• failure of utilities or essential services
• cyber incidents (where relevant) and major technology outages
• labour disruption or strikes (depending on bargaining power and industry norms)

Be careful with vague catch-all phrases like "any event beyond a party's control" - they can cause disputes about whether a particular event is included.

2) A Required Link Between The Event And Non-Performance

A good clause doesn't just list events. It also requires the affected party to show that the majeure event actually caused the failure or delay.

This protects both sides:

• you're less likely to have the other party claim "majeure" opportunistically
• you have a clearer path to relief when a genuine disruption occurs

3) Mitigation Obligations (So Everyone Acts Reasonably)

Many clauses require the affected party to take reasonable steps to minimise the impact.

This might include:

• using alternative suppliers (where commercially reasonable)
• substituting materials (if permitted)
• providing partial performance
• working around the disruption (for example, remote delivery or alternative sites)

This is important because in a real dispute, the question often becomes: "Did you do enough to keep the contract moving?"

4) Notice Requirements And Communication Rules

Strong clauses set out:

• when notice must be given
• what the notice must include (event, expected impact, estimated duration)
• ongoing update obligations
• how notice must be served (email, post, etc)

From a practical standpoint, clarity here reduces misunderstandings and keeps commercial relationships intact during stressful situations.

5) What Happens Financially During The Force Majeure Period

This is where a lot of risk sits for small businesses - especially cashflow.

You may want the contract to deal with:

• whether payment obligations are suspended or continue
• whether deposits are refundable
• whether you can invoice for work completed to date
• how unavoidable third-party costs are treated
• whether either party must absorb their own costs

Be careful: a force majeure clause that excuses your performance but still requires you to pay in full may not actually help when you need it most.

6) A Termination Pathway If The Disruption Goes On Too Long

Many clauses allow termination if the force majeure event continues beyond a specified period.

If you're drafting (or negotiating) this part, you'll want to think about:

• what time period is realistic for your industry
• what happens to outstanding orders, work in progress, and prepaid amounts
• whether termination is immediate or requires an additional notice period

If the clause doesn't deal with these issues, the dispute may just shift from "can we terminate?" to "what do we owe each other now?"

7) Consistency With The Rest Of Your Contract

Force majeure should not contradict your other key clauses, including:

• termination rights
• limitation of liability and indemnities
• service levels and KPIs
• change control / variation processes
• insurance obligations

For example, if you're updating contract terms after signing, you may need a formal contract change process (and in many cases a written variation) rather than informal "we agreed over email" arrangements.

Common Force Majeure Mistakes Small Businesses Make (And How To Avoid Them)

Force majeure clauses are often copied and pasted as "standard boilerplate", but small drafting choices can have big commercial consequences.

Mistake 1: Using A Generic Template That Doesn't Match Your Operations

What counts as a major disruption for your business depends on what you sell and how you deliver it.

A service business might need a clause that deals with staff shortages, technology outages, and access to client sites. A product business may need detailed supply chain and shipping protections. A hospitality business may need clearer rules around government restrictions and capacity limits.

If you're unsure whether your contracts are fit for purpose, a proper Contract review can help you spot gaps before they become disputes.

Mistake 2: Not Aligning The Clause With Your Customer Promises

If you sell to consumers, you need to be careful not to draft terms that conflict with New Zealand consumer protections.

For example, the Consumer Guarantees Act 1993 and the Fair Trading Act 1986 can apply to many consumer-facing small businesses. In many cases, you can't exclude or limit certain consumer guarantees (and any attempt to do so may be ineffective). There are also strict rules about misleading or deceptive conduct and making sure customer-facing statements about delays, cancellations, refunds, and rights are accurate.

That doesn't mean you can't use force majeure language - it means you should get it right and ensure your customer communications and terms are consistent and accurate.

Mistake 3: Confusing "Harder" With "Impossible"

A common misconception is that if something becomes more expensive, you can claim force majeure. Often, that's not enough.

This is why defining the threshold ("prevent", "delay", "hinder") and linking it to the event matters so much.

Mistake 4: Forgetting The Notice Process

Even a well-written clause can fail if your team doesn't follow the steps.

It's worth having an internal playbook for:

• who sends notice
• what evidence you keep (supplier emails, official notices, shipping updates)
• how you track key dates (like termination windows)

Mistake 5: Not Thinking About The "After" (Restarting, Renegotiating, Or Ending)

Sometimes the major disruption passes - but the relationship doesn't automatically return to normal. Your contract should help you manage what happens next.

Depending on your circumstances, you might need to negotiate a new timeline, adjust pricing, or formally restructure obligations. In some cases, the cleanest option is to end the agreement and replace it with a new one - and it helps to know the difference between an agreement and a deed when you're formalising outcomes (see deed and agreement).

Key Takeaways

• A force majeure clause (often shortened to "majeure") explains what happens if an unexpected event outside your control prevents or disrupts contract performance.
• In New Zealand, force majeure protection usually depends on your contract wording - it's not an automatic right you can rely on without a properly drafted clause.
• Good clauses typically cover: what events qualify, the required link to non-performance, mitigation duties, notice requirements, financial consequences, and termination rights if the disruption lasts too long.
• Force majeure is different from the doctrine of frustration - frustration can end a contract automatically, and disputes about it can be fact-specific and risky without advice.
• Small drafting details (like "prevented" vs "delayed") and process steps (like notice deadlines) can make the difference between being protected and being in breach.
• Templates and copy-paste clauses can leave gaps, especially if they don't match your industry risks or conflict with your customer-facing obligations under laws like the Fair Trading Act 1986 and Consumer Guarantees Act 1993.

If you'd like help reviewing or drafting a force majeure clause that actually fits your business, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.