Generally speaking, a force majeure clause is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled. These clauses are designed to excuse performance in the event that such an event occurs or delays performance (without terminating the contract) while the invoking party handles the force majeure event.

For example, in a typical scenario in the oil and gas context, a lessee will invoke force majeure to avoid the harsh result of lease termination when confronted with circumstances beyond its control that impede compliance with a lease deadline or obligation. This often arises in situations involving drilling or production deadlines, where unexpected events—such as extreme weather—make timely performance impossible. Instead of facing lease termination or lost acreage, a well-drafted force majeure provision can serve as a critical safety valve for operators seeking to preserve lease rights in the face of unforeseen obstacles.

Traditionally, boilerplate force majeure provisions were usually restricted to “Acts of God” and other unforeseeable, uncontrollable events. However, in the wake of trade disputes during President Trump’s first term and the supply chain disruptions and labor shortages during the COVID-19 pandemic, many drafting parties expanded the scope and definition of force majeure events to include events that would cause significant supply chain interruptions. With President Trump’s trade war affecting volatility in global markets and commodity prices, many stakeholders in the energy industry may be questioning whether force majeure provisions could be triggered in some of their contracts.

As for trade wars, sudden tariffs, and market downturns—Texas caselaw suggests that these conditions would not constitute force majeure unless they were specifically called for in the particular force majeure provision at issue. Texas courts interpret force majeure clauses narrowly and are generally reluctant to enforce provisions that rely on vague or catch-all language. The effectiveness of a force majeure clause depends entirely on the specific terms the parties negotiated. There’s no universal standard—each clause must be construed on its own terms. If the language lacks specificity, Texas courts revert to common-law principles, under which foreseeable events do not excuse nonperformance. This approach is applied even more rigorously when the hardship is financial rather than a literal impossibility.

This principle was clearly illustrated in Valero Transmission Co. v. Mitchell Energy Corp.. In that case, a natural gas pipeline company argued that a downturn in the gas market excused its obligations under a long-term purchase agreement. But because the force majeure clause did not mention economic conditions or market volatility, the court declined to excuse performance. It held that economic downturns are not unforeseeable events and that a contract cannot be avoided simply because it becomes less profitable than expected. The court went further, noting that long-term contracts often exist precisely to account for such market uncertainties.

The same logic applied in TEC Olmos, LLC v. ConocoPhillips Co. There, the driller claimed a downturn in the oil market triggered the force majeure clause. However, because the clause did not list market conditions as a qualifying event, the court turned to common law and held that “catch-all” provisions require a showing that the event was unforeseeable. The court emphasized that market fluctuations are foreseeable as a matter of law—making them insufficient grounds for invoking force majeure in the absence of express contractual language.