Contractual Considerations in Times of Uncertainty

As the war in the Middle East moves into its second week, its impact will be felt across businesses and industries.

Below, we set out some critical contractual provisions that all parties should consider at this time.

1. Force Majeure Clauses. Review the contract's force majeure clause to determine whether it suspends or terminates obligations, and what notice requirements apply. Ensure that notice is given on a timely basis and in accordance with the terms of the contract.
2. Frustration of Contract. Where no force majeure clause exists or it does not apply, consider whether the doctrine of frustration may discharge the contract partially or entirely. Frustration arises when a supervening event, without fault of either party, renders contractual performance radically different from what was agreed. However, frustration sets a high bar and courts apply it narrowly.
3. Sanctions and Export Control Compliance. War frequently triggers the imposition of new sanctions regimes and export control restrictions. Parties must audit their obligations to ensure continued performance does not expose them to regulatory liability. This includes reviewing counterparty identities, the origin of goods or services, and the jurisdiction of performance.
4. Material Adverse Change (MAC) Clauses. Examine whether the contract contains a material adverse change or material adverse effect clause, which may permit a party to suspend performance, renegotiate terms, or terminate if war causes a significant deterioration in circumstances. The drafting of MAC clauses varies considerably, and some expressly exclude geopolitical events or industry-wide conditions.
5. Supply Chain and Contractual Dependencies. War can severely disrupt supply chains, making it impossible or commercially impractical to source goods, materials, or services from affected regions. Parties should map their contractual obligations against their supply chain exposure and identify where performance depends on third parties operating in or near conflict zones. Consider activating alternative sourcing arrangements and review any sub-contracts or back-to-back agreements for consistent force majeure and termination provisions. Where supply disruption is foreseeable, early communication with counterparties and proactive renegotiation of delivery timelines or specifications may prevent disputes from escalating.
6. Insurance Coverage. Review relevant insurance policies to assess whether losses arising from war or conflict are covered or excluded. Many standard insurance policies contain war risk exclusion clauses, meaning losses attributable to armed conflict will not be indemnified. Specialist war risk insurance may be available in certain markets. Parties should notify insurers promptly of any potential claims, preserve all documentary evidence of loss, and seek advice on whether any policy terms require specific steps to be taken.
7. Governing Law and Dispute Resolution. Consider the practical implications of the contract's governing law and dispute resolution provisions in the context of war. If the agreed forum — whether court or arbitral seat — is located in or near a conflict zone, the enforceability of any award or judgment may be compromised. Parties should assess whether existing dispute resolution mechanisms remain workable and whether emergency arbitration or injunctive relief may be required.
8. Duty to Mitigate and Ongoing Communication. Regardless of whether force majeure or frustration is invoked, a party will generally remain under a duty to take reasonable steps to mitigate its losses. This includes exploring alternative performance methods, minimizing financial exposure, and avoiding unnecessary expenditure. Maintaining clear, documented communication with the counterparty throughout is essential, both to preserve commercial relationships and to create a contemporaneous record in the event of future dispute. Parties should issue formal notices in accordance with contractual requirements and keep records of all decisions and their rationale.

For more guidance and advice, please reach out to Charbel Maakaron cmaakaron@crowell.com or Matthew Williams matwilliams@crowell.com.