In construction contracts, what does the term “force majeure” refer to?

The term “force majeure” in construction contracts refers to unforeseen circumstances that can impede the ability of parties to fulfill their contractual obligations. This can include natural disasters, such as floods, earthquakes, or hurricanes—often termed "acts of God"—as well as other extraordinary events like war, terrorism, or significant governmental actions that could not have been anticipated at the time of the contract.

When a force majeure event occurs, it typically allows for a suspension of the contractual obligations or a delay in performance without penalties. This aspect is crucial in construction, where delays can lead to significant financial implications. By recognizing force majeure in contracts, parties can protect themselves from liabilities that arise due to unexpected and uncontrollable events, thus ensuring a fair and reasonable approach to contract enforcement.

The incorrect options touch upon different aspects of contracts that do not align with the specific meaning of force majeure. Financial penalties for late work involve consequences for not meeting deadlines, while intellectual property rights and negotiation strategies pertain to different legal considerations and strategic aspects of business arrangements, respectively.