The US‑Israeli strikes on Iran and swift regional retaliation has triggered significant instability across global energy and shipping markets. Prices are climbing, key routes are compromised, and one of the world’s most strategically important waterways has faced temporary closure. With such extensive disruption, many businesses are asking an inevitable question: do these events trigger force majeure or material adverse change rights under their contracts?
Force Majeure: The Essentials
Under English law, the term is simply a label for a type of contractual provision designed to address unexpected, disruptive events.
Key points:
- No automatic protection – under English law, force majeure only applies if the contract expressly provides for it. Whether relief is available depends entirely on how the clause was drafted – its wording, scope and evidentiary requirements.
- Precise wording matters – parties must show the event fits the clause and meets the required contractual threshold (e.g., prevented, hindered).
- Causation is crucial – parties must demonstrate not only that the event qualifies, but that it directly renders performance impossible or severely obstructed, rather than merely uneconomic. Price spikes alone will not qualify.
- Mitigation required – parties must take reasonable steps to mitigate the impact of the event.
- Notice rules are strict – missed deadlines can invalidate the claim. It is critical to follow the notification requirements for a force majeure vent very carefully.
- Commercial impact – invoking force majeure may trigger other counterparty rights such as termination after prolonged non-performance or suspension of exclusivity or supply commitments. The short‑term benefit of force majeure may be outweighed by long‑term contractual or commercial risks.
MAC Clauses: High Bar, Narrow Interpretation
MAC clauses generally provide that if a party claims hardship or material adverse change in circumstances, notice may be given and the parties will negotiate a solution in good faith.
Key points:
- Durational significance – English courts look for changes that are substantial, lasting and well beyond ordinary commercial risk. Short‑term volatility, even if acute, rarely meets this standard.
- Burden of proof is high – MAC clauses require parties to demonstrate that material deterioration is sustained and not within the original commercial or geopolitical risk allocation of the deal, imposing a heavy evidential burden.
- Carve‑outs – Many MAC clauses also expressly exclude market‑wide or sector‑wide events – precisely the kind of systemic price shocks and supply disruptions businesses are currently facing. As a result, even severe operational pressure may fall outside the intended scope of many MAC provisions unless the impact is uniquely specific to one party.
What Businesses Should Be Doing Now
In this climate, contractual analysis cannot wait. Reviewing force majeure and MAC wording, preserving robust evidence, engaging early with counterparties and closely monitoring geopolitical developments will be essential over the coming weeks. These steps won’t just clarify legal rights – they will inform the commercial strategy needed to navigate a rapidly evolving situation.
Read the full insight
This blog offers a brief overview only. For detailed guidance on force majeure, MAC clauses and the practical steps businesses should consider now, read the full insight on our website.
