Steering Through Uncertain Times - Key Points To Consider On ‘Force Majeure’ Clauses

A force majeure clause will not be implied into a contract in English law, and it is therefore imperative for parties whose obligations could be affected by circumstances beyond their control to push for the inclusion of such a clause, whilst also ensuring that it is adequately drafted offering and suitable level of protection.

The following are some key points to consider when drafting a force majeure clause:  

1. Define covered events clearly. Use a non-exhaustive list that includes both traditional risks (e.g. acts of terrorism, war and embargoes) and emerging risks (e.g. pandemics, government-imposed shutdowns, cyber-attacks, climate events and tariffs and regulatory changes).
2. Include notice requirements. Specify when and how notice must be given and what (if any) documentation may be required to invoke the clause.
3. Mitigation obligations. From the perspective of the party who is less likely to be affected by a force majeure event, consider including an express provision requiring the affected party to mitigate the effects of the force majeure event on the performance of its obligations. A force majeure clause will commonly provide that it cannot be relied upon if the exercise of reasonable endeavours could avoid the effects of the relevant event.
4. Consequences of a force majeure event. The clause should specify the consequences of triggering force majeure - this may include the suspension of obligations, extension of deadlines, or termination rights if the event persists for longer than a prescribed period.  In particular, the clause should make clear whether or not the corresponding obligations of the party not affected by the force majeure event (commonly the customer’s payment obligations) are also suspended during the period for which the force majeure event is in effect.

It is important to bear in mind that not all obstacles in contract performance will qualify as a force majeure event, and a court may refuse claims based on:

1. Anticipated events. If an event was predictable, it is unlikely to qualify (e.g. laws or regulations known at the time of contracting - if a law existed or was in contemplation before the contract was signed, it is unlikely to be held to be a force majeure event).
2. Economic difficulty. Increased costs or financial losses will generally not constitute force majeure and are likely to be better covered under a specific price review mechanism.