Since the start of the global pandemic in March 2020, force majeure clauses have been under close scrutiny and their application and presence in commercial contracts have increased which means that it is more important than ever to know how these contract clauses work.
What is force majeure?
English law has no recognised meaning of “force majeure” in terms of the precise circumstances it covers. Therefore, most English law contracts need to define exactly what constitutes a force majeure event by reference to events “beyond a party’s reasonable control”. This is usually done via a non-exhaustive list of the type of events covered and includes circumstances such as acts of god, terrorist attacks, pandemics, strikes.
Top tips for managing force majeure issues
- Make sure your contract covers unforeseen events. Both parties to a contract should be able to suspend or delay its performance if it is genuinely prevented from doing so by circumstances outside of its control.
- Always read the force majeure clause in a contract…and read it again! Does the specific situation fall within the definition of a “force majeure” event under the contract? Remember, a party relying on force majeure will need to establish a direct link between the event and the impediment to perform the contract before they can trigger the force majeure clause.
- Many force majeure clauses merely provide for a party’s obligations to be suspended for the duration of the force majeure event. They rarely give rise to an immediate right to terminate, so always look before you leap!
- If you can invoke a force majeure clause, consider the time limits and notice for doing so.
- Consider if there are alternative ways of performing your contractual obligations and take appropriate mitigation steps. You might prefer to use your contractual right as a bargaining chip rather than acting on it – i.e. discuss reducing / modifying your obligations rather than avoiding them completely.
- Retain all evidence of any disruption, delay or prevention under a contract, including documentation proving delay or cancellation.
- Be proactive! Rather than waiting until you need to rely on force majeure, communicate with your counter party and start discussing force majeure issues and implications, both short term and long term. When the force majeure event is over, you will still want a sound relationship with your counter party.