Resources Contracts: Mining for Profits After Force Majeure

Has the Queensland flood catastrophe handed resources companies a welcome advantage? "Force majeure" – a legal let-out clause that allows sales contracts to be suspended or cancelled without penalty under extreme circumstances – is now urgently up for review. More than a handful of major coal producers declared force majeure when the floods hit. With commodity prices skyrocketing, companies have discovered they can make more by selling coal on the spot market than under pre-existing arrangements. As a result several are reportedly renegotiating contractual terms. Lawyers say force majeure is often overlooked. And, as extreme weather events are arguably becoming predictable, the climate for these legal clauses is also changing.