Force Majeure Clause

Force majeure is French for "superior force". In a contract, it describes events that neither party can control and that stop or delay performance. A typical clause has five working parts:

• The events. A list such as fire, flood, earthquake, war, terrorism, epidemic, strikes, failure of public utilities and "restrictive laws" or government orders, usually followed by a catch-all for other causes beyond the party's reasonable control.
• Causation. The event must cause the failure. Clauses differ on whether the party must be prevented from performing, or merely hindered or delayed.
• Exclusions. Many clauses exclude financial inability or lack of funds, and some also exclude changes in market conditions.
• Notice and mitigation. The affected party usually must give prompt written notice and take reasonable steps to limit the impact.
• The consequence. Performance may be suspended, deadlines extended, or either party allowed to terminate if the event lasts beyond a stated period.

Ontario contract law, like the common law elsewhere in Canada, has no stand-alone force majeure rule; Quebec's Civil Code, which recognizes superior force, is the exception. In Ontario, a party gets only the relief the clause describes, for only the events it lists. If an event is not covered, or the clause is missing, the fallback is frustration, which is far harder to establish.

The leading recent Ontario decision is Niagara Falls Shopping Centre Inc. v. LAF Canada Company, 2023 ONCA 159. LAF, the tenant, leased premises in the landlord's shopping centre to operate a fitness club. COVID-19 orders closed gyms for extended periods. The lease's force majeure clause covered a party "delayed or hindered in or prevented from the performance of any act" because of events including "restrictive laws", "financial inability excepted". It said performance would be excused for the period of delay and that the time for performance would be extended for an equivalent period. A further sentence said failures resulting from lack of funds, or that could be cured by paying money, were not force majeure events.

The Court of Appeal described two components: a party must be delayed, hindered or prevented from performing an act required under the lease, and the failure must be caused by an event that meets the clause's definition. Applying the wording:

• Rent was still payable during the closures. The tenant's payment obligation fell within the lack-of-funds exclusion.
• The landlord's obligation was affected. The closures, as restrictive laws, prevented the landlord from providing premises usable as a fitness facility.
• The remedy was an extension. The motion judge had called a lease extension commercially absurd. The Court of Appeal disagreed and extended the lease term by the length of the closures, with no rent payable during the extension because the tenant had already paid rent for the closure periods.

The Superior Court applied the same reasoning to another LAF lease with a substantively identical clause in LAF v. Woodbine, 2025 ONSC 3914, extending that lease by 348 days. It also rejected the argument that a breach is needed before a force majeure clause applies; the only preconditions are those in the clause.

The lesson is that wording controls. In Windsor-Essex Catholic District School Board v. 2313846 Ontario Limited, 2022 ONCA 235, a differently drafted clause expressly gave the tenant a rent abatement. Two leases, two clauses, two different results.

Frustration is a common law doctrine that ends a contract when an unforeseen event, not caused by either party and not provided for in the contract, makes performance radically different from what the parties agreed to. Higher costs or a harder path to performance are not enough.

Ontario's Frustrated Contracts Act applies to contracts governed by Ontario law that have been frustrated, with a few exceptions such as contracts of insurance. Sums paid before discharge are recoverable, sums payable cease to be payable, and a court may let a party keep or recover an amount up to its expenses where that is just. Section 3(6) gives priority to the contract: if a provision was intended to operate in frustrating circumstances, the court gives effect to it and applies the Act only so far as consistent with it.

A well-drafted force majeure clause therefore does two jobs. It gives relief for events short of frustration, and it decides the consequences if a catastrophic event would otherwise frustrate the contract.

Generic wording copied from another contract is the most common problem. Points to settle:

• List the risks that matter to this business. A supplier may want cyberattacks, failure of its own sub-suppliers and transport disruptions covered; the customer may want them excluded.
• Decide about payment obligations. Many clauses exclude them, as the LAF lease did. If a tenant or customer should be relieved of payment during a shutdown, the clause must say so expressly.
• Choose the causation standard. "Prevented" is narrow. "Hindered or delayed" is broader and gives relief more often.
• Make notice workable. If notice is a condition of relief, missing the deadline can forfeit the protection.
• Add a long-stop date. A right for either party to terminate if the event lasts more than, say, 60 or 90 days avoids an open-ended suspension.
• Address substitute supply. Can the customer buy elsewhere during the event, and must it return afterwards?

The clause interacts with termination rights. A failure excused by force majeure is generally not a material breach giving the other side a right to terminate, unless the contract says otherwise. In ongoing relationships the clause usually sits in the master services agreement or supply agreement, and it should be reviewed alongside the other terms flagged in our business agreements guide. Commercial leases carry their own version; see our commercial lease negotiation guide.

Chiara Bellini owns a Vaughan bakery that supplies packaged bread to a Mississauga grocery distributor run by Rohan Pillai. Their supply agreement lists "failure of public utilities" as a force majeure event, requires written notice within five business days, excludes payment obligations, lets the distributor buy substitute product during the event, and allows either party to terminate if the event lasts more than 45 days.

An ice storm cuts power to Chiara's plant for 16 days. On day two she sends written notice by email, a method the agreement's notice clause permits. Rohan buys replacement bread from another bakery at $62,000 more than the contract price and asks Chiara to cover the difference.

Chiara's lawyer reviews the clause. The outage is a listed event, it caused the missed deliveries, and notice was given on time, so the late deliveries are excused and the $62,000 claim fails. The distributor still owes $140,000 for bread delivered before the storm, on the usual terms, and cannot set the rejected claim off against that invoice. The plant restarts on day 17, well short of the 45-day termination right, so the contract continues. A clause that left out utilities, or a notice sent after the five-business-day deadline, could have produced a very different result.