Force Majeure Clauses – What You Need to Know
2 April 2020
There’s a lot of misunderstanding surrounding “Force Majeure” clauses which appear in many different types of contracts.
It is very important that those seeking to enforce contracts or review their status to have a clear understanding of under what circumstances these clauses come into effect.
Let’s start with what they are not and why they need careful handling.
Key misconceptions about Force Majeure
A force majeure clause is not always a reason for cancelling a contract because of extenuating circumstances.
In practice, many clauses only suspend the performance of a contract. They don’t give a party the general right to repudiate or terminate the contract altogether.
So, for example, most delays in the supplies of goods and services don’t trigger this clause except in specific circumstances. The main exception to this is where time is of the essence.
If the shipping of a cargo of apples is delayed and the produce falls below an acceptable standard for human consumption, then the contract could be concluded without payment or loss as there is no way of remedying it. If the apples are shipped but late and still in perfect condition, then there’s no loss.
There are, of course, several different outcomes somewhere between the two.
Where Force Majeure comes from
These clauses came to the fore in the UK in the 1970’s during various strikes and widespread industrial action. During this period many contracts were what lawyers would describe as “frustrated” meaning that although both parties were willing to perform the contract, one of the parties could not do so because goods could not be manufactured or shipped to order.
These types of situations are rare today – but they do still happen. War, strikes and civil unrest are often cited as triggers for force majeure clauses.
What you need to do
As always, every situation and contractual arrangement is different, and should be approached as such.
In the current pandemic parties may wish to rely on such clauses to absolve themselves of taking on stock or contracts that they no longer require.
In such a time, it is always good to have a bespoke set of terms and conditions that cover your particular situation and industry. Lack of clear legal grounding, and genuine grounds behind the invocation of the clause could cause a serious issue.
If in doubt, take advice early and don’t rely on what you think a clause may mean to you – or you could find yourself on the receiving end of a claim.
Chamber international as a an official body, mandated by UK H.M Government to certify documentation used in international trade, can issue Force Majeure certificates on behalf of traders.
For further information contact Sam Paley, Trade Procedures Manager, on +44 (0)7827 318692 or email.
Kindly supplied by Vituoso Legal
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