The recent escalation of armed conflict with Iran is causing significant disruption to shipping and air transport and increasing the volatility of oil and other commodity prices.

Within the last week several large enterprises, such as Bapco, Kuwait Petroleum, QatarEnergy, YNCC in South Korea, Aluminium Bahrain, and Chandra Asri have already invoked force majeure provisions in their contracts seeking relief from having to perform due to circumstances beyond their control.

The Contractual Implications for Businesses

The shockwaves from the conflict in Iran are spreading quickly through global markets and impacting business.

As a result, many businesses must quickly determine what their contracts allow them—and their counterparties—to do in rapidly changing circumstances. Companies should start by reviewing their agreements to answer key questions such as:

• Can we or our counterparty suspend performance or terminate the contract?
• Can we or our counterparty allocate increased costs to the other party?
• Can we or our counterparty adjust pricing?

These are the most obvious questions, but as disruptions ripple through supply chains, second-order effects will raise additional issues. For example, insurers have reportedly withdrawn coverage for vessels operating in the region. This makes it necessary to examine insurance documentation carefully. In some cases, the loss of insurance coverage itself may constitute a breach of contractual obligations requiring insurance to be maintained. Businesses that could be affected by this will need to review the insurance requirements in relevant contracts to determine whether they may be in breach.

For in-house legal, procurement, and commercial teams, the priority is to understand how their contracts apply in these circumstances. But reviewing large volumes of agreements under time pressure can be extremely challenging. AI-powered contract analytics can help teams accelerate contract review and quickly surface the provisions that matter most.

Key Contract Provisions to Review in Light of the Iran Conflict

Force majeure provisions: The first key question is which relevant contracts have force majeure provisions and which don’t?

But even if a contract contains force majeure provisions there are further questions that need to answered:

• Does the force majeure provision specifically mention “war” or circumstances like these as a force majeure event? Inevitably there will be questions as to whether particular strikes or blockades themselves constitute “war”.
• How is the causal link between the event and the ability to perform expressed in the force majeure provision? Does the provision require that the event make performance impossible, not merely impracticable, expensive or commercially unviable? Is it tightly expressed, or is the provision worded in way that allows an argument to be made in the case of less direct causal links?
• What notification is required in relation to force majeure?

The interpretation of force majeure clauses can vary by jurisdiction, so it is important to consult legal advisors once you identify the relevant provisions in the relevant contracts.

Termination Rights: It’s not just force majeure provisions that are relevant; some contracts may allow for termination in certain circumstances such as war. Invoking a force majeure will itself often give rise to a right to terminate the contract.

• As always, it is a matter of reviewing the provisions to see if they can be triggered in these circumstances.
• Termination provisions do have notice requirements–some of which can be lengthy–so, given the current situation, time will be of the essence in triggering termination.

Cost Allocation Clauses: With the spike in prices of commodities and certain goods and services, the costs of businesses can increase materially. These businesses may be able to allocate some other these increased costs to their counterparties as some contracts include cost allocation or sharing provisions. As usual the devil is in the details, and these provisions do vary widely in many ways including as to which costs they apply to.

Price Adjustment or Escalation Clauses: Another way a business can alleviate the burden of increased costs is by increasing their prices. Some contracts allow a party to increase prices based on certain specified cost increases or by reference to certain benchmarks or indexes such as CPI or commodity indexes. Some of these provisions allow the supplier more discretion to increase the price based on their own costs. These provisions also vary widely in form and substance.

AI Contract Review with Catylex Delivers Fast, Accurate Results

Crises often expose a structural problem inside many enterprises: companies do not always know what is actually in their contracts, making it difficult to answer urgent questions.

Historically, turning to people alone has been the only viable option. But reviewing dozens or even thousands of contracts to identify and analyze relevant provisions under tight deadlines is not truly scalable from a time or cost perspective. Even when teams know what provisions to look for, locating the relevant agreements and analyzing them quickly can be overwhelming for many legal departments.

Catylex enables businesses to rapidly identify the relevant provisions across large contract portfolios so they can be analyzed efficiently, allowing teams to answer urgent business questions in a matter of hours rather than weeks.

However, speed on its own isn’t enough. Accuracy matters just as much. If a system produces unreliable outputs, significant manual effort is still required to verify the results before they can be trusted. Catylex addresses this challenge through a differentiated extraction approach that combines multiple AI techniques to deliver highly reliable results at scale. By contrast, LLM-only solutions (including those relying on vector-based RAG) may require substantial manual review before their outputs can be trusted.

When supply chains are disrupted and counterparties begin invoking force majeure, having rapid visibility into contractual rights and obligations becomes critical.

Whether you need to respond to counterparties invoking force majeure or send out your own notices, Catylex gives your team the insight needed to act with speed and confidence.

Once the immediate disruption passes, that same contract intelligence will remain in place, ready to help your team respond to whatever issue arises next.