Force Majeure from a Developer or Principal’s Perspective

During Covid-19, contract reviews for construction contracts are more recommended than ever. In a previous episode of Talking Legal, we looked at delay and the Force Majeure clause on construction contracts from a builder’s perspective. This episode, we explore the clause from the perspective of a developer or principal.

To recap, a Force Majeure clause concerns “acts of God” and the following elements:

• Events that occur by human or natural elements
• Events that cannot be reasonably foreseen by the contracting parties
• Events outside of the control of the contracting parties (they could not prevent it from happening)

1. Is the situation any different for a Developer’s or Principal’s side of the contract?

If a force majeure clause is included in a construction contract, it’s important to look at it regardless. However, the perspective of a builder’s is completely different to the perspective of a developer’s or principal’s.

A builder is likely to be concerned about supply issues. A developer is often concerned about their obligations – for example, they may have given undertakings to their financier.

2. Does a developer have to agree to a delay or enacting of a Force Majeure clause?

I would advise developers not to rush into such a situation, as this needs to be carefully considered. The parties should always think about the effects of enacting such a clause.

Common consequences of enacting a force majeure clause can include:

• Suspension of contractual obligations
• Exercising of liability for non-performance or delays
• Termination of contract
• Extension of time
• Re-negotiation of certain terms

Enacting a force majeure clause is not something to enter into lightly, and it’s not usually something a developer should want to enter into as it changes the contractual landscape and could lead to potentially unforeseen consequences.

For more information, read the full blog HERE