Force majeure is literally translated as "superior forces". In contractual terms, it is recognised as the occurrence of an unexpected event / events beyond the control of either contracting party which disrupts the operation of the contract such that the contracting parties are excused from their liabilities and/or obligations under the contract. It is however not intended to excuse any negligence or malfeasance. It can also suspend the performance of an obligation or extend the time to perform the same.
Force majeure is only recognised in English law if there is a force majeure clause in the contract or a reference in the contract to force majeure. This is different from civil law jurisdictions where force majeure can apply regardless.
The purpose and effect of a force majeure clause is to define, as precisely as possible, the circumstances under which a contracting party is released from its contractual obligations. Parties have the ability to negotiate the scope of the clause (i.e. how wide / expansive the clause is) and the specific instances to be included within the clause. For an event to be regarded as a force majeure event, it must fulfil three tests:
- Externality – the event / circumstance must be beyond the control of the contracting parties.
- Unpredictability – the event / circumstance cannot be anticipated / foreseeable / expected.
- Irresistibility – the event / circumstance is unavoidable.
Historically, force majeure events were recognised as forces of nature or acts of God events. However, the clause can and has been expanded to include events which are industry or transaction specific. Certain events created by extraneous human intervention can also fall under the category of force majeure events.
Example: fire, flood, earthquake, storm, hurricane, other nature disasters, war, invasion, act of foreign enemies, hostilities, civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalisation, government sanction, blockage, embargo, labour dispute, strike, lockout or interruption or failure of electricity or telephone service.
In the event that there is only a reference to force majeure – example "force majeure excepted", what constitutes force majeure is then determined on a case by case basis. This would include an "Act of God" / "forces of nature" event but can also extend to extraneous human intervention events.
The burden of proof rests on the party relying upon force majeure. The party must show that the occurrence of the event falls under the force majeure clause or constitutes a force majeure event, such that the party was wholly or partially prevented from performing the contract. The party has to show that the performance of the contract was adversely affected by the force majeure event and that such event and/or non-performance was beyond the party's control and that there were no reasonable or proportionally reasonable steps to be taken to avoid the event and/or its consequences.
Parties can also agree to impose additional conditions before the force majeure clause can be invoked. This includes requiring notice before invocation to allow the other party to either try to mitigate or reduce any foreseeable losses or reserve its rights; or placing an obligation on the invoking party to mitigate the effects of the force majeure by taking reasonable steps to limit or prevent the loss.
Drafting Force Majeure Clauses:
- Is a force majeure clause necessary to protect yourself in your contractual relations?
- What might constitute a force majeure event that would be relevant to your contractual relations which should be included in the clause, above and beyond the standard events?
- Is the clause intended to cover only events where there is no party at fault?
- What are the conditions, if any, to be included in the clause – notice, mitigation, suspension of performance, extension of time for performance, etc?
- What is the intended effect of the clause?
What to do in the event that you think the force majeure event / clause may apply?
- Consider the contractual position in relation to applicable law and jurisdiction. As set out above, the position in the UK is different from civil law jurisdictions.
- Consider the scope of all the clauses – and consider whether there is a specific force majeure clause and what the scope of the clause is, also any other clause which may have the effect of extending or limiting the scope of a force majeure clause / event.
- Consider whether the three above tests are satisfied to determine whether the event being relied upon indeed falls under the ambit of being a force majeure event.
- Consider all facts to determine that you meet all the conditions that may be required to be met before the force majeure clause is invoked.
- Consider whether you can take any steps to mitigate the loss that may follow from the force majeure event.
This article sets out in brief detail the working of force majeure and how it affects contracts between parties and whether you require the inclusion of a force majeure clause in your contracts and if so, how such clause should be drafted.
Please do not hesitate to contact LA Marine with any queries, or for further information on Force Majeure, or if you would like us to assist you in drafting or re-drafting your Force Majeure clause or even for a consultation as to whether you require a Force Majeure clause in your standard contracts.
We hope you have found this article useful and interesting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
