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How can you navigate force majeure clauses in construction contracts?

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Force majeure clauses are provisions in construction contracts that allow the parties to suspend or terminate their obligations in the event of unforeseeable circumstances beyond their control, such as natural disasters, wars, or pandemics. These clauses are meant to protect the parties from liability and losses caused by such events, but they can also create disputes and challenges when interpreting and applying them. In this article, you will learn how to navigate force majeure clauses in construction contracts and avoid potential pitfalls.

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Rikesh Ramsurn

Project Leader - Electrical at Ecoasis Energy Companies
Abanoub Ghobrial

Civil Technical Office manager - Coordinator | 9-years of experience Tekla Modeler
Elena Stefania Olga Ripamonti

Avvocato specializzato in contratti internazionali e operazioni societarie

1 Understand the scope and triggers of force majeure

The first step to navigate force majeure clauses is to understand the scope and triggers of the clause in your contract. Force majeure clauses can vary widely in terms of what events qualify as force majeure, how they affect the performance of the contract, and what remedies are available to the parties. Some clauses may list specific events, such as earthquakes, floods, or strikes, while others may use general terms, such as acts of God, acts of government, or events beyond the parties' reasonable control. You should read the clause carefully and consult a lawyer if you have any doubts or questions about its meaning and implications.

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Abanoub Ghobrial

Civil Technical Office manager - Coordinator | 9-years of experience Tekla Modeler
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In addition, we should check the history of the region where we will work. and reading carefully the clause, and we should choose our lawyer carefully with his vast experience to can support us in the decision.

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Elena Stefania Olga Ripamonti

Avvocato specializzato in contratti internazionali e operazioni societarie
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Definition of the events triggering the force majeure clause based on likelihood criteria is key. This requires knowledge of the business and of local circumstances. Everybody is familiar with the notion of an “act of god”, but for a contractor employed in a coastal area it may be more useful to address the issue of sea surges, knowing that the salt released in the air locally may jeopardize proper performance of certain works, which would therefore better be temporarily suspended.

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Steve Cvitanovic

General Counsel at Build Group, Inc
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Historically, the Contractor’s relief for force majeure events was time but not money. However, the world has changed dramatically since the concept was introduced in England in the 1800’s. Force majeure events can cause massive financial loss to the Contractor in this day and age, especially if the contract is a guaranteed maximum price contract. When negotiating the contract, the Contractor should request compensation for as many force majeure events as possible. Having the Contractor bear significant financial risk is not reasonable in light of the fact the the Contractor will always have that loss but the Owner may make it up in the form of an appreciating asset or refinancing.

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2 Notify the other party promptly and properly

The second step to navigate force majeure clauses is to notify the other party promptly and properly if you intend to invoke the clause or if you receive a notice from the other party. Most contracts will require a written notice within a certain period of time after the occurrence of the force majeure event, specifying the nature and extent of the event, the expected duration of the impact, and the actions taken or planned to mitigate the effects. You should follow the notice requirements strictly and keep a record of the communication and documentation. Failure to do so may result in losing the right to claim force majeure or being liable for damages.

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Ama?l Olivier

Construction Delay Expert & Founding Partner @ Orizo Consult International | AI Specialist
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The certain period of time mentioned in this section is often referred to as a timebar clause, meaning the event must be notified by the end of the allowed period or it may be considered void

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3 Negotiate in good faith and explore alternatives

The third step to navigate force majeure clauses is to negotiate in good faith and explore alternatives with the other party. Force majeure clauses are not meant to be used as an excuse to avoid contractual obligations or to gain an unfair advantage. Rather, they are meant to facilitate a fair and reasonable adjustment of the contract in light of the changed circumstances. You should try to find a mutually acceptable solution that minimizes the disruption and losses for both parties, such as extending the deadlines, modifying the scope, or sharing the costs. You should also consider whether there are any alternative ways to perform the contract, such as using different materials, methods, or subcontractors.

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Rikesh Ramsurn

Project Leader - Electrical at Ecoasis Energy Companies
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Different countries may have different contractual laws, many of them applying FIDIC Contracts or inspired by them. More importantly, in such cases, Professionals may often apply diligent flexibility to reach mutual goals, benefiting all parties.

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4 Document the impact and the actions taken

The fourth step to navigate force majeure clauses is to document the impact and the actions taken as a result of the force majeure event. You should keep a detailed record of how the event affected your ability to perform the contract, such as the delays, disruptions, extra costs, or lost revenues. You should also document the actions taken or attempted to overcome or mitigate the impact, such as seeking alternative sources, rescheduling work, or applying for permits. This documentation will help you support your claim or defense in case of a dispute or litigation.

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Ama?l Olivier

Construction Delay Expert & Founding Partner @ Orizo Consult International | AI Specialist
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It is recommended to try reaching an agreement with the counterparty as fast as possible in order to gain visibility on the new reality of the project so that informed decisions can be taken. Whilst the parties will often disagree on at least some of the consequences of a force majeure event, one could try to agree on specific items such as the scope of works and/or ressources affected by the event, the critical path of the project at the time of the event, the date the event started and ended, etc. This will reduce the scope in dispute and thus uncertainties. A status quo often makes parties work towards incompatible goals, which damages the project budget and completion date

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5 Review your insurance coverage and seek legal advice

The fifth step to navigate force majeure clauses is to review your insurance coverage and seek legal advice. Force majeure clauses do not necessarily relieve you from your insurance obligations or cover you for the losses caused by the force majeure event. You should check your insurance policy and contact your insurer to confirm whether you are covered and what steps you need to take to file a claim. You should also seek legal advice if you are unsure about your rights and obligations under the force majeure clause or if you face a dispute or litigation with the other party. A lawyer can help you understand the legal implications, risks, and options of your situation and advise you on the best course of action.

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6 Stay updated and flexible

The sixth and final step to navigate force majeure clauses is to stay updated and flexible. Force majeure events are often unpredictable and evolving, and they may require you to adapt and adjust your plans and expectations accordingly. You should monitor the situation closely and communicate regularly with the other party, your suppliers, your subcontractors, and your clients. You should also be prepared to resume or modify your performance as soon as the force majeure event ceases or allows. By staying updated and flexible, you can minimize the negative impact of the force majeure event and maintain a good relationship with the other party.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you navigate force majeure clauses in construction contracts?

1

2

3

4

5

6

7

1 Understand the scope and triggers of force majeure

2 Notify the other party promptly and properly

3 Negotiate in good faith and explore alternatives

4 Document the impact and the actions taken

5 Review your insurance coverage and seek legal advice

6 Stay updated and flexible

7 Here’s what else to consider

Construction

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How can you navigate force majeure clauses in construction contracts?

1

2

3

4

5

6

7

1 Understand the scope and triggers of force majeure

2 Notify the other party promptly and properly

3 Negotiate in good faith and explore alternatives

4 Document the impact and the actions taken

5 Review your insurance coverage and seek legal advice

6 Stay updated and flexible

7 Here’s what else to consider

Construction

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