An overview of Force Majeure clauses
What is a force majeure clause?
A force majeure clause typically excuses one or both parties from performance of the contract in some way following the occurrence of certain events. There is no set form of force majeure clause wording, so clauses must be considered on a case by case basis.
Their underlying principle is that, on the occurrence of certain events which are outside a party’s control, that party is entitled to suspend or delay performance of all or part of its obligations and is excused from liability in respect of such failure or delay.
Under an English law contract, parties will not generally be able to rely on force majeure unless the contract contains a force majeure clause, since English law has no general rule of force majeure.
When can you rely on force majeure?
If your contract contains an express force majeure clause and you are intending to rely on it, whether the event constitutes a force majeure event under the relevant contract will depend on the particular wording of the force majeure clause.
If you are seeking to rely on the force majeure clause, you will bear the burden of proof to prove the scope of the clause and demonstrate that the facts in question fall within that scope.
How do you trigger the force majeure clause?
Again, this depends on the wording of the clause in question. Typically a force majeure clause will include formalities that must be complied with.
Force majeure clauses typically contain a notice requirement to invoke them. Notice invoking the force majeure clause may need to be given in a particular way and / or within a particular time period.
Failure to adhere to the relevant requirements may result in the protections afforded by the force majeure clause being lost, and may consequently result in you being in breach of the agreement if you are unable to comply with your contractual obligations.
What are the consequences of triggering the force majeure clause?
This will depend on the wording of the relevant clause, but outcomes typically include:
• The ability for affected party to suspend performance and be granted an extension of time for performance;
• The affected party being excused from liability for non-performance and / or inadequate performance for a period of time;
• An obligation on the affected party to mitigate the effects of the force majeure event;
• The ability for the unaffected party to terminate the contract – often the termination right will arise if the non-performance continues for a prescribed period of time, but this is not always the case and in some cases the termination right will arise immediately.
As described above, one of the potential consequences of the triggering the force majeure clause is that it may entitle the unaffected party to terminate the contract. Therefore, you should carefully assess whether triggering the force majeure clause is the most favourable approach for you in the circumstances.
If an unexpected event occurs which has or is likely to affect contract performance, it does not automatically mean that the affected party should trigger the force majeure clause – careful consideration should first be given to the requirements of the contract and whether any other more preferable options may be available.
This will typically involve a review of the contract as a whole in order to ascertain what the contractual obligations actually are – for example, if timescales for delivery are expressed as being estimates only, it may not be necessary for the supplier to trigger the force majeure clause if supply disruption is experienced.
How can we help?
For strategic advice on commercial contracts and force majeure, please contact the commercial team at Herrington Carmichael LLP using the details provided below.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
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