What is "Force Majeure"?

What is “Force Majeure”?

Commercial parties typically use the term “force majeure” to describe a situation or event over which they have no control and for which they believe they should have no liability.   Under English Law, however, the phrase “force majeure” has no legal definition. Similarly, there is no common law “force majeure” concept.   Consequently, as a matter of English law, “force majeure” is purely a contractual term and it must have been expressly included by the parties in the contract.  The scope of its operation is defined and dictated solely by what has been included within the contract. 

A force majeure clause will typically excuse one or both of the parties from performance of the contract following the occurrence of a specified event or events beyond the control of the parties. Such events will often include an act of nature (particularly relevant in the wake of hurricanes Harvey, Irma and Maria), riot, rebellion and the outbreak of war. 

In the absence of a force majeure clause, the only other alternative under English law to excuse performance when outside events affect a party’s ability to perform is to rely on the doctrine of frustration.  Frustration will only occur in narrow circumstances where performance becomes impossible or something completely different from that contemplated by the contract.  Consequently, a force majeure clause offers greater flexibility to the parties.

Charterparty: Force Majeure Clause

A force majeure clause must be very clearly drafted or it will run the risk of being void for uncertainty.  Generally, a force majeure clause will include:

• a list of specific events which are defined as force majeure such as weather, strikes, or war.  The clause may also include a general provision intended to cover other events which are not named in the specific list (for example, inclusion of the phrase “…or any other causes beyond [a party’s] control…”). 

Most charterparties define what “force majeure” means but if the term “force majeure” is used in the clause – i.e. “…the occurrence of a force majeure event…”-  without being defined, the meaning of force majeure in that case must be determined by reference to the types of situations listed in the clause or found elsewhere in the contract itself.  Typically, the English Law courts construe force majeure clauses narrowly against the party seeking to rely upon it.

• What the remedy (or remedies) will be if one of those events occurs (typically the clause may allow for extension, suspension, variation or termination of the contract). 

NB If a force majeure clause specifically allows for a force majeure event to interrupt the running of laytime and/or demurrage, charterers cannot rely upon it to cancel the contract; termination would have to be expressly included as another remedial option in order for the charterers to rely upon it.

• An obligation to report the event.  This provision may detail to whom the report should be made, the form of the report and the timescale in which it is to be submitted.  When invoking a force majeure clause, it is important to carefully follow any such provision.

Effect Upon Performance and Proving Force Majeure

A force majeure clause will usually set out that in order to operate, performance must be either “prevented”, “hindered” or “delayed” by the force majeure event.  Where performance is to be “prevented”, the party relying on the clause must prove that performance was legally or physically impossible (and not just difficult or unprofitable).  “Hindered” or “delayed” are lower tests with a wider scope, where generally the relevant party will need to prove that performance was substantially more difficult (although financial hardship alone would probably not be enough).  However, it should be noted that a force majeure clause will not be interpreted to cover events brought about by a party’s negligence or wilful default, even if they come within the definition of a “force majeure” event under the contract.

A party wishing to rely upon a force majeure clause must prove the facts bringing the situation within the protection of the clause.  He must, therefore, prove:

(a)    the occurrence of one of the events referred to in the clause;  

(b)   that he has been prevented, hindered or delayed (as required by the clause) from performing the contract by reason of that event;

(c)    that his non-performance of the contract was due to circumstances beyond his control; and

(d)   there were no reasonable steps he could have taken to avoid or mitigate the event or its consequences.

Given these significant limitations upon the use of a force majeure clause or argument, the collection of evidence is crucial when seeking to prove force majeure.  Such evidence will include, amongst other things, internal and external correspondence, notices, publications such as newspaper reports and government warnings, surveyor’s reports, and agent/port authority communications.  As set out above, when invoking a force majeure clause it is also important to carefully follow any reporting obligations included within the clause.

If Members have any claims or queries relating to force majeure, then we recommend that they contact their usual FD&D claims handler.