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What is a force majeure clause?
A force majeure clause typically operates to give a party relief from its obligations when there is an event outside the control of that party which prevents or delays performance of those obligations. Traditionally, to qualify as force majeure such events have had to be extreme- such as natural disasters or wars. However, critically, the effect of these clauses is determined by what the clause actually says.
This alert is intended as a reminder of the importance of Force Majeure clauses and their content. Not all force majeure clauses are the same- they can be broad or narrow in scope and serve one party better than the other. Importantly, English law does not imply force majeure terms and will only apply doctrines like frustration in rare circumstances where performance is impossible, making it a far narrower route to relief.
Why does it matter?
A force majeure clause is particularly important for suppliers as it can offer protection where performance is disrupted or becomes difficult due to external influences and market factors (e.g., export bans, port closures, raw material shortages, cyber security incidents). Without such a clause, a supplier may be in breach of contract and face a damages claim and/or termination even if non‑performance is genuinely beyond its control.
A supplier is typically motivated to seek a widely drafted definition of force majeure as it has the majority of the performance obligations and is most likely to be negatively impacted by various factors- this may, for example, include industrial action by the supplier's own employees/agents/subcontractors or issues in its supply chain.
A customer, on the other hand, usually wants to keep the force majeure definition as narrow as possible and either to an exclusive list of specific events or to events that are outside the "reasonable control" of the supplier. A well-advised customer would certainly want to exclude areas a supplier can control with sufficient oversight of its business.
It follows that negotiation of the definition of "force majeure" should not be overlooked and can become quite contentious. Indeed, a customer who only has an obligation to pay may not want to include a force majeure clause at all and may wish to leave it as a supplier risk.
It is, though, standard market practice to include a force majeure clause in commercial contracts. And if a clause is to be included, careful drafting creates greater certainty and allows an element of planning, structure and control should the relevant circumstances arise.
Well-designed clauses can require prompt notification, reasonable endeavours to overcome the event, clear evidential standards so that the non-affected party can assess impact and engage contingency measures and ultimately a mutual or unilateral termination right where the force majeure has affected performance for a specified period. They can also allocate cost between the parties- for example, dealing with the customer's liability to continue to pay the charges where performance is suspended and each party's liability for the other party's costs of dealing with the force majeure.
What if the contract is silent?
If a contract is silent on force majeure, a possible fallback is frustration—a high bar that discharges the contract entirely only where performance becomes impossible or radically different. For most disruptions that a party would be seeking to cover under a force majeure clause (including increased cost or supply chain bottlenecks), frustration will not apply, leaving the affected party exposed.
Recent case law developments
In RTI Ltd v MUR Shipping BV (UK Supreme Court, 2024)the Court confirmed a requirement in force majeure clauses that the relevant circumstances cannot be overcome by using "reasonable endeavours", to do so does not require acceptance of non‑contractual performance (i.e. in this case payment in a Euros rather than US dollars). The decision reinforces the principle that in contractual disputes what the contract says is paramount and that workarounds outside the contract are not required.
In Seadrill Ghana Operations Ltd v Tullow Ghana Ltd (Commercial Court, 2018)the Court clarified that, to be relied upon, the force majeure event must be the sole reason for non-performance, not one of many. Where a party's own contractual or commercial choices contribute to non‑performance, force majeure relief may be unavailable.
In Canary Wharf (BP4) T1 Ltd v European Medicines Agency (High Court, 2019) although a frustration case, the decision highlights that changes in circumstances (i.e. Brexit in this case) rarely discharge contracts under English law under the doctrine of frustration. It reinforces the importance of including express force majeure/change‑in‑law provisions rather than relying on frustration.
Best practice drafting recommendations
- Draft definition with precision: Define "force majeure event" clearly – it is reasonably standard to combine an illustrative list of specific events with a general catch‑all tied to events "beyond the reasonable control" of a party. However, a customer may seek an exclusive list and will be keen to exclude foreseeable or internal business risks of supplier or risks it feels the supplier should take responsibility for (e.g. strikes of its own employees).
- Set an appropriate causation threshold: "Prevents" is stricter than "hinders" or "delays". Align the threshold with your risk appetite and the importance of the contract. Use objective language and avoid ambiguity about partial versus total disruption.
- Include robust procedure: Insert notification and evidential obligations. Provide a clear sequence of consequences (e.g. suspension, time extensions, and mutual or unilateral termination rights for prolonged events).
- Address cost and risk allocation: Specify the effect on payment and other obligations in the contract (e.g. liquidated damages, service levels and business continuity).
- Coordinate with related provisions: Ensure consistency with change‑in‑law/ change control, termination for convenience, price adjustment, limitations of liability, step‑in rights, and business continuity clauses. Misalignment can create gaps or double relief.
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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.
