The recent Paris bombings and the onset of winter weather caused me to pause and think again about some of the force majeure provisions we draft for our clients in their commercial contracts.

Most of our readers understand the concept of force majeure – an event outside the control of a party which usually allows that party some relief under a contract.  It is not, though, a legal term of art.  So simply using the expression on its own is unlikely to provide you with any protection in a contract.  Acts of terrorism and unusually bad weather could both be considered by business people to be force majeure events.

Take a supplier who has contracted to deliver goods or components to a manufacturer. If he simply can’t access his warehouse because a police cordon due to a bomb threat has prevented vehicles getting in or out, then his failure to deliver on time is arguably not his fault. Or, what about the maintenance business which cannot get to a site to repair it because roads are flooded after an exceptional period of storms?

In both these examples, if the contract has not dealt specifically with force majeure, then the party unable to perform its obligations could well find itself in breach of contract. That’s because force majeure is not a term which is implied into commercial contracts.  If it hasn’t been expressly included, relief is unlikely to be available. In such cases, it is possible to consider whether to invoke the legal doctrine of frustration of contract, but this will usually only apply in very limited circumstances.

So we strongly recommend that every commercial contract includes an express force majeure provision.  And this shouldn’t just be a “boilerplate” clause using formulaic wording each time.  Spending some time considering how force majeure could affect performance under each particular contract ought to be an integral part of every supplier’s and every customer’s approach to their overall risk management process.  In the examples given, the parties ought to consider how remote a terrorist act needs to be before any force majeure provision ceases to apply.  Would, for example, the imposition of economic sanctions on a country due to its State-sponsored terrorism provide a supplier with grounds for arguing that he cannot perform because that country is the source of his raw materials?  Also, while flooding caused by adverse weather might seem to be a perfectly reasonable circumstance to provide relief in most contracts, that simply would not work for a utility provider which is sub-contracting the maintenance of its sub-stations to a third party.  It is precisely when the weather is at its worst that they are most likely to be affected so the utility provider will expect its suppliers to have the necessary resources to cope with adverse weather conditions.

The first step we recommend is to contemplate what circumstances ought to give rise to relief from performance.  There are, of course, some events which are commonly included such as: acts of God, fires, explosions, armed conflict and failure of utilities.  Others may be more contentious. Typically, a supplier will want to include labour disputes and strikes whereas a customer will often oppose this or at least limit these to disputes not involving the supplier’s own staff.  Similarly, a supplier may want to be excused from performance if its sub-suppliers do not perform.  The customer might reasonably take the view that such a risk ought to be managed and borne by the supplier.

Once these events have been identified, the force majeure clause should be clear that the party affected by the event is excused from performance under the contract.  That party should, however, also have an express obligation to mitigate the effects of the force majeure event and to notify the other party as soon as it becomes aware of it. Finally, it is usual to include a longstop date after which the non-affected party has an option to terminate the contract.

Bear in mind that if you are dealing on standard terms of business rather than a negotiated contract, then the Unfair Contract Terms Act 1977 will apply.  That means, if the force majeure clause is unreasonable (as defined in that Act) it will be unenforceable.  Furthermore, if you are dealing on standard terms with a consumer as the other party then as well as this test, it will also need to satisfy the fairness and transparency tests contained in the Unfair Terms in Consumer Contracts Regulations 1999.