Defining and Understanding Force Majeure

May 5, 2020

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Triggering a Force Majeure is about living by the exact words. These clauses are typically interpreted with a very narrow view. The words are generally not given a broad meaning and therefore the exact wording used in these clauses is very important. First, let’s take a step back and define what a Force Majeure actually is. A Force Majeure Clause is a contractual provision that may operate to excuse a party from a contract as a result of an unexpected and disruptive event.

A Force Majeure Event must be:

  1. Beyond the control of the parties
  2. Substantially delay or prevent the work to be completed under the contract.
  3. Unforeseen, not anticipated or expected
  4. Unavoidable

In most construction contracts, the Owner requires that the Contractor delivers the project by the agreed upon time, otherwise the Owner can impose monetary or other damages to the Contractor. These damages can be significant and can often increase unless there is a valid reason to stop the project.

Enter Force Majeure. This is the clause in the contract that allows either party to claim that an outside event effects the contract. This can stop either party from imposing penalties against each other. If a specific event has created a situation where it is impracticable or impossible to get the project completed, than you have a defense for stopping work. However, Force Majeure Clauses vary from jurisdiction to jurisdiction. The fact is that Force Majeure depends on the contract, on the jurisdiction, and the specific circumstance.

Some popular language regarding Force Majeure that might be in your contract

According to the Public-Private-Partnership Legal Resource Center, Force Majeure Event1 means the occurrence of:

(a) an act of war (whether declared or not), hostilities, invasion, act of foreign enemies, terrorism or civil disorder;

(b) ionising radiations, or contamination by radioactivity from any nuclear fuel, or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof;

(c) pressure waves from devices traveling at supersonic speeds or damage caused by any aircraft or similar device;

(d) a strike or strikes or other industrial action or blockade or embargo or any other form of civil disturbance (whether lawful or not), in each case affecting on a general basis the industry related to the affected Services and which is not attributable to any unreasonable action or inaction on the part of the Company or any of its Subcontractors or suppliers and the settlement of which is beyond the reasonable control of all such persons;

(d) specific incidents of exceptional adverse weather conditions in excess of those required to be designed for in this Agreement which are materially worse than those encountered in the relevant places at the relevant time of year during the twenty (20) years prior to the Effective Date;

(e) tempest, earthquake or any other natural disaster of overwhelming proportions; pollution of water sources resulting from any plane crashing into [ ];

(f) discontinuation of electricity supply, not covered by the agreement concluded with the [utility company]; or

(g) other unforeseeable circumstances beyond the control of the Parties against which it would have been unreasonable for the affected party to take precautions and which the affected party cannot avoid even by using its best efforts, which in each case directly causes either party to be unable to comply with all or a material part of its obligations under this Agreement;

Ultimately, you must look at the specific language in your contract, including the applicable laws. Your contract’s exact wording will determine if you’re able to adjust your contract timeline without penalty.

If you have any questions about an event that may trigger Force Majeure in your contract, or you’re unsure how your contract clause is written, it’s best to reach out to your Broker. For any additional concerns, contact to TSIB today!

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1 World Bank Group. “Sample Force Majeure Clauses.” World Bank Group Public-Private-Partnership Legal Resource Center. Last Updated 2016-11-09. Retrieved May 5, 2020, from https://ppp.worldbank.org/public-private-partnership/ppp-overview/practical-tools/checklists-and-risk-matrices/force-majeure-checklist/sample-clauses

Topics: Contracts

Written by The TSIB Team