With the Covid-19 pandemic continuing to cause widespread disruption and uncertainty, many businesses may, understandably, be considering whether invoking force majeure is both possible and in their best interests.
An effective commercial contract should cover a wide variety of potential eventualities and circumstances. However, there are often very specific and extraordinary scenarios that are beyond the control of the relevant parties, which would prevent them from fulfilling their contractual obligations.
For that reason, many commercial contracts include force majeure clauses. These alter parties’ obligations, or liabilities should something significant and highly damaging occur that could not have been predicted nor prevented.
The consequences of a force majeure clause will depend on the specific wording. For instance, some force majeure clauses may excuse an affected party from performing their contractual obligations, which others may entitle them to suspend or claim an extension of time.
Here, we discuss when force majeure can be used, which situations it may apply to and what may happen if there is a disagreement over the use of one.
Why does wording matter with regards to force majeure?
It is important to note that the term ‘force majeure’ has no established meaning or consequences in English law. This means that whether a specific clause will relieve a party of their contractual liability depends on the precise wording of said clause and how it relates to the event in question.
So, for example, if a force majeure refers specifically to a particular event, such as a pandemic, then this is likely to be sufficient grounds for it to be used if Covid-19 is shown to have had an impact.
On the flip side, if a commercial contract sets out broad criteria and, for instance, simply refers to something that is ‘beyond the parties’ control’, then this may be a question of interpretation. This is something we’ve discussed in a previous blog.
Can you use force majeure if the phrase is simply referenced in a contract?
It is very rare for a reference to the phrase ‘force majeure’ to be enough in itself. It will be a question of interpretation as to whether the parties intended the issue at hand to fall under such a standalone reference. A party seeking to rely on this simple reference will struggle, as the courts have traditionally interpreted these questions strictly.
What else needs to be proven for force majeure to be used?
In addition to having a suitable clause in the contract, various other factors need to be shown for a force majeure clause to be invoked, depending on the specific wording of the clause.
An individual seeking to rely on a force majeure clause will typically need to prove that:
- The force majeure event (e.g. Covid-19, a weather event) was the cause of a failure to uphold a contractual obligation
- The failure to uphold the contractual obligation was beyond that party’s control
- That party has taken all reasonable steps to prevent, or at least mitigate, the event or the consequences
The final point is important, especially with regards to the ongoing Covid-19 pandemic. Given the fluid nature of the pandemic, businesses may be expected to have plans in place to counter any potential issues, which could have an effect on the application of force majeure.
What happens if no force majeure clause is present?
If there is no force majeure clause present in a commercial contract, then an affected party will need to look for alternative provisions or clauses that provide potential routes out of the difficulties.
This is often very difficult and will certainly require the assistance of a commercial contracts Solicitor, who will be able to carefully review the contents of a commercial contract and assess how it should be interpreted and what options are available.
Can a force majeure clause be disputed?
As you might expect, the fact that force majeure clauses often leave room for interpretation means that they can often be disputed if the parties do not agree on its use.
If a dispute arises from the application of a force majeure clause, then the parties may seek to find a resolution through methods such as mediation or negotiation. Depending on the situation, court proceedings may be required to reach a positive outcome.
Get in touch with our commercial contract Solicitors
If you are considering invoking force majeure for a commercial contract, or your business needs to respond to a force majeure claim, our expert commercial contract Solicitors are on hand to lend their expertise.
We can work alongside you to provide carefully tailored advice about force majeure clauses. This may include advising on your prospects for successfully relying on a specific event to avoid liability for breaching a contract – or to uphold a contract where another party has made a force majeure claim.
For further information about our contract dispute resolution service, get in touch with our commercial law Solicitors in Alconbury, Birmingham, Nottingham, Peterborough or Spalding.