Force majeure clauses and COVID-19

The term force majeure, from the French ‘irresistible compulsion or coercion’, often occurs in business contracts as a clause to cover the impact of events beyond the control of the parties.

In The Eugenia, Ocean Tramp Tankers Corporation v V/O Sovfracht (1964), Lord Denning MR considered the interpretation of such a clause in a case arising out of the Suez crisis.

The Eugenia was a vessel chartered for ‘a trip out to India via Black Sea’. It set sail from Genoa on 20 September 1956, following a route that took it via Odessa, arriving in Port Said on 30 October 1956 and entering the Suez Canal the next day before being impounded in the canal.  The Eugenia eventually reached its destination on 12 January 1957.

The charterers claimed that their contract with the owners had been frustrated. The owners disagreed and sought damage for repudiation of the contract. Lord Denning MR held that ‘…the contract must govern. There is no frustration’. The charterer, in sailing into the canal, could not then argue frustration based on their own actions. An alternative route via the Cape would have taken 138 days, rather than the intended 108 days. The goods would not have been materially affected – the only factor was that it would have taken 30 days longer to reach the intended destination.

A pandemic may well suffice to trigger a force majeure clause. Such a clause could specify what ‘Force Majeure Event’ means in the context of the specific agreement. For example:

…any circumstances beyond the reasonable control of that party including, without limitation, any strike, lock-out or other form of industrial action, shortage of components or raw materials, lack, interruption or failure of any utility service, or lack of available facilities, non-performance by suppliers or subcontractors, collapse of buildings, fire, explosion, accident, acts of God, storm, flood, drought, earthquake, epidemic, pandemic or other natural physical disaster, terrorist attack, civil commotion or riots, war, civil war, threat of or preparation for war, armed conflict, imposition of sanctions, embargo, or breaking off of diplomatic relations, nuclear, chemical or biological contamination or sonic boom, any law or any action taken by a government or public authority (including without limitation imposing an export or import restriction, quota or prohibition, or failing to grant a necessary licence or consent…

Alternatively, where an event is not specifically expressed, it will be a matter for the Courts to interpret on the evidence.

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Force Majeure
What does your small print say?

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