Getting Out Of A Contract Which Is Now Impossible To Perform – Force Majeure Clauses

What is a force majeure clause?

A force majeure clause may offer parties to a contract protection against situations which are reasonably out of their control and prevent them from honouring the contract. Force majeure is a French term that literally translates as superior forces.

Inspiration is taken from the French meaning in contract law. A force majeure clause is a contractual term which may excuse one or both parties from performing their duties under a contractual agreement. Parties may be excused on the occurrence of an exceptional and unexpected event that cannot be avoided by the parties.

Force majeure is not clearly defined in English law. Thus, the meaning and effect of the clause will depend on the wording in the contract agreement.

Common force majeure examples

The term is commonly referred to as events or series of events which prevent or delay a party (or parties) from performing their obligations under the contract. They include but are not limited to acts of God, natural disasters, laws, government orders, war and pandemics.

Force majeure usually encompasses disruptive and unforeseen circumstances beyond a party’s reasonable control. It does not tend to include inconvenience due to market conditions or financial viability, especially if the party is not actually prevented from performing its contractual duty. Therefore, a party cannot rely on the clause for mere impracticability.

Contracts can be drafted to list the specific events which can be considered force majeure. In other cases, the clause can be represented in a more general nature and simply refer to an ‘unforeseeable event which is beyond the control of the parties, and which results in the disruption of the Agreement’.

The party (or parties) relying on a force majeure clause may:

Steps to rely on a force majeure clause

A contract with a force majeure clause will often be drafted to outline particular steps to be taken by the party invoking force majeure.

These steps typically entail notifying the other party of the force majeure event, within a specified timeframe of the nature and scope of the force majeure event. Moreover, the party invoking force majeure is usually obligated to make efforts to mitigate the impact of the event, fulfil its obligations to the extent feasible, and resume performance of its contractual commitments as soon as possible. There is also usually a requirement to provide regular updates to the party unaffected by the force majeure event.

Right to Terminate

The party unaffected by the force majeure event, will normally have the right to terminate the agreement between the parties if the affected party continues to be hindered by the event, for longer than certain period. The clause will usually detail the required period of time that must pass before the unaffected party will be allowed to terminate the agreement. That party will usually have to give notice before terminating the agreement.

Challenging the validity of the Clause

Force majeure clause may be subjected to a question of validity, under the Unfair Contract Terms Act 1977 and, for consumer contracts, the Consumer Rights Act 2015. In which case, a Court will need to determine the reasonableness of the clause.

Summary

Force majeure clauses can be used by parties to suspend or be excused from performance, when it becomes impossible to perform due to unexpected and exceptional events. The parties will have the option to also cancel or terminate the contract as a result of the force majeure event. The event must be beyond the control of the party hoping to rely on the force majeure clause. It is imperative that you seek specialist advice to you want to have such a clause in your agreement. The wording used when drafting the clause plays huge importance in the ability for you to use it. Any errors could risk your position.