Contract Risk Management

Force Majeure and Fertilizer Contracts: Protecting Bulk Buyer Interests

Published by MC INTERNATIONAL S.P.A CO., LTD | June 2025 | 10 min read

Why Force Majeure Clauses Matter More Than Buyers Expect

Force majeure (FM) clauses are standard boilerplate in most international sales contracts — so standard that many buyers sign contracts without carefully reviewing the specific FM language. But the COVID-19 pandemic, the 2021 fertilizer supply crisis, the Russia-Ukraine conflict's impact on ammonia and potash supply, and periodic port closures due to extreme weather events have demonstrated that FM events in fertilizer supply chains are not theoretical risks. They are recurring commercial realities.

For bulk fertilizer buyers — distributors with downstream supply commitments, cooperatives with planting season obligations, and national buyers under government contract — a poorly drafted FM clause in your purchase contract can leave you exposed to major financial loss when your supplier invokes FM and suspends delivery. This guide explains what to negotiate and what to refuse when reviewing FM clauses in fertilizer supply contracts.

What Constitutes a Valid Force Majeure Event?

A valid FM event is typically defined as an unforeseeable circumstance beyond the affected party's control that prevents performance of the contract. In fertilizer trade, the following events are generally accepted as valid FM:

Red Flags: FM Clauses That Favor the Seller

Some supplier-drafted FM clauses are written so broadly that they effectively give the seller an exit option from any contract that becomes inconvenient — regardless of whether a genuine FM event has occurred. Watch for these red flag provisions:

• "Market conditions" listed as a FM trigger — price volatility is a commercial risk, not a force majeure event. Reject this language.
• "Supply chain disruption" without further qualification — a broad supply chain disruption clause could cover any supplier's inability to source raw materials, which is their commercial risk to manage. Require the FM event to specifically affect the manufacturer's facility or the contracted shipment route.
• No time limit on FM suspension — FM clauses should specify a maximum suspension period (e.g., 60–90 days) after which either party may terminate. Without a time limit, an FM declaration can keep your contract in suspended animation indefinitely while you are unable to source elsewhere.
• No notice requirement — FM should require prompt written notice (within 5–10 business days of the FM event) with documentary evidence. Retroactive FM declarations after shipment failure should not be permitted.
• No refund of deposit on termination — if FM results in contract termination, your advance payment deposit should be fully refunded. Clauses that allow the supplier to retain the deposit "as compensation for production preparation costs" in an FM termination scenario are unreasonable.

Buyer-Protective FM Provisions to Negotiate

1. Specific FM event list: Negotiate an exhaustive list of accepted FM events rather than a general catch-all — this prevents creative FM claims for commercial setbacks.
2. Notice requirement with evidence: Require written notice within 5 business days of FM event onset, with documentary evidence (government order, news report, insurance assessment).
3. Best efforts obligation: The FM-invoking party must demonstrate "best efforts" to overcome or work around the FM event — including sourcing from alternative facilities if available.
4. Maximum suspension period: If FM continues beyond 60–90 days, either party may terminate with full refund of deposits and no further liability.
5. Alternative supply obligation: If your supplier invokes FM for their facility but can source equivalent product from another manufacturer, they should be obligated to do so at the original contract price.
6. Deposit refund on termination: On FM termination, all advance payments refunded in full within 30 days. No offset against alleged preparation costs.

Protecting Yourself When Your Supplier Invokes FM

If you receive a FM notice from your fertilizer supplier, take the following steps immediately:

1. Request supporting documentary evidence — a general FM declaration without documentation is not valid
2. Verify that the claimed event actually occurred and specifically affects the contracted shipment
3. Notify your own downstream buyers and begin sourcing alternative supply — do not wait for the FM dispute to be resolved before protecting your own obligations
4. Send a formal written response acknowledging receipt of the FM notice and reserving your rights under the contract
5. Review the contract's dispute resolution clause — understand your options (negotiation, mediation, arbitration, litigation) and the governing law

How MC INTERNATIONAL S.P.A Approaches FM in Contracts

Our standard export contracts use a specific, enumerated FM event list — not a broad catch-all clause. We provide the FM event list to all buyers before contract signing so there are no surprises. Our FM clauses include a 60-day maximum suspension period, a prompt notice requirement with evidence, and a full deposit refund obligation on termination. We also commit to best-efforts alternative sourcing in the event our primary facility is affected by a valid FM event.

We have maintained zero FM claims on our export contracts over our 10+ years of operation — a track record we attribute to geographic supply chain diversity, conservative production scheduling, and a policy of never over-committing supply capacity relative to our confirmed production capacity. Our export team is happy to review FM clause language with any buyer's legal team before contract finalization.