Facing Up To Force Majeure

Force majeure ("FM") can be defined as 'a right which excuses a party from performance of the contract, in whole or in part, where an event beyond its control has occurred'.

The term is French in origin and is recognised in many civil law systems (e.g. French Civil Code) as a defence to a breach of contract claim. However, there is generally no recognised FM doctrine under English common law and therefore it is only available if provided for as a contractual right.

The scope of FM and the nature of remedies available will be as expressly provided for in the Contract.

Requirements for FM

The party relying on FM provisions must show that a FM event has occurred which entitles the Party to relief.

Typical requirements are:

1. That a FM event (as defined by the contract) has occurred);
2. The FM event has caused that party's non-performance – not some other event/circumstance;
3. Non-performance of obligations was beyond the affected party's control and was not part of their contractual obligation to perform;
4. No reasonable steps that could have been taken by the affected party to prevent the FM event; and
5. All required notices were given.

It is important to note that FM usually means an entitlement to additional time but not costs. This is of course subject to the wording of the Contract, so it is important to ensure your contract contains protections, so you are not placed at risk, whether of losing some entitlement or paying for the event.

Types of FM Events

The contract may include an exhaustive list of FM events, or a non-exhaustive list, e.g. FIDIC 2017 Models sets out 'Exceptional Events' at Clause 18.1, listing examples of FM events such as war, rebellion, riot, strike, but these are not limited.

Events commonly found in FM clauses and historically considered FM events:

• War, rebellion, invasion, terrorist acts;
• Riots, civil commotion/disorder;
• Strikes and labour disputes (at a national level);
• Storms, floods, earthquakes and other natural disasters and Fire.

Events that are now often being negotiated into FM clauses:

• Pandemic and epidemic;
• Cyber-attack and cyber terrorist acts; and
• Unavailability of shipping transportation routes and means.

What Does Not Constitute FM?

• Bad weather;
• Change in economic circumstances or market conditions; and
• Shortages of labour materials and equipment.

But this depends on the words used in the FM clause, e.g. there is a difference between performance "prevented" or "hindered" by a party.

Prevented: physically or legally impossible to perform obligations – not merely become more difficult or expensive to do so – Dunavant Enterprises Inc v Olympia Spinning & Weaving Mills Ltd [2011].

Hindered: interpreted more broadly than "prevented"-

• May include circumstances where performance will be delayed due to the occurrence of the FM event;
• May also include circumstances where performance would require that other contracts are broken by the affected party; and
• usually still won't cover obligations that are more expensive to perform.

Is the FM event actually causing non-performance? Question of fact – is the party affected by other non-FM events?

The event must be 'outside of a party's control' (see FIDIC Contracts), i.e. the party could not have provided against the event occurring (e.g. in the case of riots, could the party have provided additional security to prevent the impact of the riots on the works/project?).

Duty to Mitigate

• Usually, it is an express requirement that a party takes steps to mitigate, or overcome, the FM event, which may require the expenditure of money; and
• Important to check how far the affected party must go, e.g. there are different requirements for 'reasonable endeavours' vs. 'best endeavours.'

Procedural Requirements

• The FM Clause will normally require the affected party to give notice, within FIDIC Contracts the requirement is 14 days after the affected party 'became aware, or should have become aware' of the event;
• It is important to check whether the giving of notice is a condition precedent, as it may mean you are time- barred; and
• Other information may be required, e.g. regular updates, or a mitigation plan be provided.

Helpful Tips

1. Remember that FM provisions are for the benefit of both parties, not just the Contractor;
2. Think about risks specific to the project/scope and whether these should be addressed, e.g. general references to 'government actions' may not be sufficient to cover certain occurrences;
3. Make sure it is clear – avoid ambiguous events (e.g. 'act of god') and those that overlap with other provisions of the contract;
4. Consider what happens in the event of a prolonged FM – termination rights, cost recovery; and
5. Keep it simple – avoid overly complicated procedural requirements, and spell them out.

This topic was discussed in our webinar 'Facing up to Force Majeure' with Steve Gibson of Chevron in October 2023. Click here to view the webinar and presentation.

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.