Supreme Court ruling on force majeure clauses
In MUR Shipping v RTI (2024), the Supreme Court ruled on the interpretation of a force majeure clause in a shipping agreement. The judgment makes clear that its findings here are applicable to force majeure clauses generally, and that this was not a narrow issue of interpretation. Unless there is clear wording to the contrary, most force majeure provisions will be interpreted in the following way:
- The importance of reasonable steps: The clause will only apply if the event or state of affairs that has caused the problem with performance cannot be avoided by taking reasonable steps. The Supreme Court said that this would normally be the case even if there is no express reference to reasonable endeavours.
- The importance of the original bargain: The clause is not intended to allow the party who is unable to perform to effectively change the terms of the original bargain by requiring the other party to accept non-contractual performance. If the other party chooses to accept such performance, it can opt to do so – but it is not under any obligation to accept it.
However, although the above comments reflect the way that most force majeure clauses are drafted, you should not assume that all such provisions will automatically be interpreted in this manner. It is essential to consider the precise wording of the clause – and we have previously highlighted a case where the drafting led the Privy Council to treat the issue of non-contractual performance differently.
For more detail on the MUR dispute, see: MUR Shipping v RTI: key lessons from the Supreme Court's ruling on force majeure clauses.
AI in service supply and outsourcing contracts: managing the risks
Artificial intelligence tools can be a game changer in outsourcing and other contracts for services - promising big wins in terms of costs, time, accuracy, scalability and productivity, to benefit both sides of the negotiating table. To reap those benefits, it is important to stay on top of the "new" risks associated with the use of AI in these arrangements. As we explain in our briefing, some of these risks might be entirely new, but many are a recasting of familiar challenges. The briefing includes discussion of:
- Accuracy and reliability issues
- Data protection
- Rights to access third party data (particularly in the light of moves by many licensors to restrict the ability of licensees to submit their data to AI tools)
- Exit and data migration
- Technical standards e.g. the difference between "compliant" and "certified"
- Intellectual property risks
- Transparency and explainability
- Avoiding bias and discrimination
- Regulatory risk
- Flexible commercial models and assessing value.
What will a Labour Government mean for outsourcing?
In the latest issue of our regular publication, Outsourcing Spotlight, we look at the potential impact of the Labour Government, particularly in relation to employment issues and public procurement.
This edition also includes coverage of:
- Impact of the 2019 Hague Convention and the latest on arbitration reform;
- Financial services: EU and UK measures to tighten regulation of outsourcing;
- Pensions dashboards: an outsourcing checklist for pensions schemes and administrators; and
- Key recent HR developments including TUPE, pay transparency, umbrella companies and new laws on sexual harassment, flexible working and holiday.
Outsourcing video series: 3-minute primer on AI and outsourcing
Finally, don't miss the latest in our Outsourcing video series, in which partner James Longster provides a 3 minute primer on six key issues to consider when looking to deploy AI as part of an outsourcing transaction.
Smart contracts: where are we now and does AI have a role to play?
Smart contracts have been partially eclipsed by the recent focus on AI, particularly Generative AI. But as we explain in our briefing, smart contracts have their uses – and it's possible that in future, generative AI could complement smart contracts to further automate the contracting process. The briefing also contains a handy jargon-buster, together with a "back to basics" explanation of smart contracts and their current uses, including:
- fintech and decentralised finance;
- royalty payments;
- insurance; and
- service default.
Meanwhile the discussion on AI explores whether the technology could be used alongside smart contracts to provide a more efficient means of expert determination.
Pricing and payment issues
We continue our series on pricing and payment issues with briefings on the following topics:
- When does failure to pay trigger a termination right? In commercial contracts, the terms of payment are usually a key element of the parties' bargain – so if a customer fails to pay a material sum on time, then surely the supplier should have a right to terminate the contract? Quite possibly, but in practice it may not be as straightforward as this – and if the supplier reaches for the "big red termination button" prematurely, without a careful assessment of its rights, it can be a costly misstep. Our briefing looks at drafting tips for both suppliers and customers when it comes to payment obligations and termination rights and the position if one party is insolvent.
- Who bears the risk of currency fluctuation? What happens where you're required to pay in a different currency from your own and exchange rate fluctuations mean that suddenly, the cost (in your own currency) has gone up considerably? Our briefing looks at how the English courts have approached this issue and what you can do to protect yourself against this type of risk.
Other briefings in our Pricing and Payment series
Other briefings in the series cover the following topics:
Payment issues
Pricing issues
Transparency and "market-testing" mechanisms/protections
Are EU-derived rights for sales agents in the UK under threat?
As part of its attempt to reduce the amount of EU derived law in the UK, the previous Government launched a consultation on whether to repeal the Commercial Agents Regulations. Among other things, these Regulations enable certain sales agents to claim substantial sums from the business that they act for when the agency comes to an end. Whilst the previous Government was minded to repeal this legislation, the new Labour Government has yet to indicate its view. It is possible that it could decide that it has other priorities; alternatively, it may be more willing than the previous Government to look at changes such as removing protection from sales agents above a certain size, whilst retaining it for smaller agents. For more background, see our briefing.
Thinking of entering into a commercial agency agreement now?
Principals looking to enter into new agreements likely to be caught by the Commercial Agents Regulations may wish to consider whether it is worth holding off until the position has been clarified. Agents, by contrast, may prefer to get on and sign the agreement as soon as possible, given that the consultation makes it clear that existing agencies covered by the Regulations will not be affected (and adopting a retrospective approach would be highly unusual for UK legislation).
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.
