Force Majeure Clauses in Commercial Contracts

A contract by its very nature requires that the parties to the contract perform their obligations which they have expressly agreed to undertake. If a party fails to carry out or discharge its obligations under the contract (in the absence of any provision entitling that party to do so) that party does so at its own risk. A court will specifically compel that party to perform its obligations or will order substituted performance by way of an award of damages in favour of the promise.

Sometimes it can become impossible for one or more parties to the contract to perform their obligations under the contract, whether that be physically, economically or legally impossible.

The concept of a “force majeure” event is not a common law concept. It derives from French civil law, meaning “superior force” or “overwhelming force”. However, the concept is often incorporated into commercial contracts in common law countries. The clause governs the relief that is available when a party is not able to perform the obligations under the contract.

In Lebeaupin v Crispin [1920][1] the Court approved the definition of force majeure:

“Force majeure … [means] all circumstances independent of the will of man, and which it is not in his power to control, and such force majeure is sufficient to justify the non-execution of a contract. Thus war, inundations and epidemics are cases of force majeure.… [and also] a strike of workmen.”

For an effective “force majeure” clause, the clause must carefully define the events that will trigger the clause. Force majeure clauses are not implied. Your contract may contain references to defined events, natural disasters, government intervention, epidemics and in light of the COVID-19 crisis, pandemics. You will need to examine the relevant contract provisions to ensure you comply with the notice provisions to trigger the clause.

In our next article, we will examine the common law doctrine of frustration; which relieves parties from performing their contractual obligations.

Contact Conditsis Lawyers today for all your contract needs (02) 4324 5688

[1] 2 K.B. 714 at 719

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