Are you prepared?

Let me remind you what is Force Majeure.

Force majeure, a French term meaning "superior force," refers to a boilerplate clause commonly found in the later part of the contract. These clauses can relieve a party of obligations if events beyond their control make fulfilling the contract difficult. Think hurricanes, fires, earthquakes, or floods – natural disasters. But force majeure can also encompass human-caused events like terrorism, war, or major global conflicts.

It basically allocates the risk of loss if performance is hindered, delayed or prevented because of an event that parties could not have anticipated or controlled.

The legislation covers it.

UAE Civil Code

There are various provisions on Force Majeure and its consequences. Article 273 provides that if a contract is deemed impossible to perform due to a result of Force Majeure the contract will be terminated automatically. Article 287 provides various examples of extraneous events, including natural disaster.

Bahrain Civil Code

Article 165

If a person proves that the injury resulted from a cause beyond his control, such as unforeseen circumstances, force majeure, the fault of the victim or of a third party, he shall not be liable to make reparation unless there is a provision to the contrary.

But before we get that consoling smirk on let’s quickly analyse, is it that straightforward?

After all the recent floods only lasted 2-3 days and we were forewarned so technically it was not unforeseeable – does that make a difference?

What do we need to consider when drafting and interpreting this clause?

When unforeseeable events make fulfilling a contract impossible, a force majeure clause excuses the party from those responsibilities. It provides a contractual defense, the scope and effect of which will depend on the express terms used in the contract. Using the right words can have a significant impact.

The American Bar Association outlines four key components:

• Defining a force majeure event
• Specifying that a breach can be excused
• Causal connection between these two points
• Detailing what happens when performance is excused

Therefore, bear these points when drafting this clause. Also, it’s recommended to add that the party must intimate the other party if it cannot carry out its obligations and that it will take appropriate measures to mitigate its effect.

Unforeseeable Problems?

If the event was not listed in the contract, the breach is not excused. However, unforeseen events not explicitly mentioned might still be covered. Courts have generally considered the COVID-19 pandemic unforeseeable even when 'pandemic' was not mentioned in the list – but I guess that was an exceptional case.

Again you have to word it in a manner that it can cover short-term events that even if there was a slight chance of its occurrence you will get some cushion period to accommodate delays or non-performance. It is all in the wording.

What's Not Covered?

Force majeure clauses have limitations. They typically don't cover:

• Predictable Events:?Rain on an outdoor concert is unfortunate, but foreseeable. The show can likely be rescheduled.
• Statements of Circumstance:?If a contract explicitly states it won't be voided by a specific event, force majeure becomes irrelevant.
• Self-Induced Frustration:?A party can't use force majeure if their actions caused the issue.
• Negligence or Malfeasance:?Force majeure doesn't excuse parties from duties. If a fire destroys crucial property and reasonable steps weren't taken to prevent it, the clause most likely will not apply.

Using the Force Majeure Clause

Force majeure clauses are common because they help allocate risk. If a business can't fulfill its obligations, it should immediately inform the other party. Sometimes, solutions can be found, like renegotiating, pausing or adjusting performance goals, or offering alternative solutions.

Takeaway

Unforeseen situations can arise, forcing abandonment of contractual obligations – that’s life. However, transparency, cooperation, and seeking solutions to minimize damages can help build goodwill even when fulfilling the contract as expected becomes impossible.

So if you find yourself on the wrong side of Mother Nature and need guidance as to whether you’ve got a valid claim for additional time and/or costs, look to the force majeure provisions of your contract.?

Last point to ponder - force majeure should not be lightly invoked as a bargaining chip where it may not be applicable. If you declare force majeure on behalf of a client and it turns out that you were wrong,?your client likely committed an anticipatory repudiation—a breach of contract that could subject your client to liability for damages and discharge the other party of its contractual obligations.

And then there are common law theories, such as impossibility and frustration of purpose, but they get invoked where there has been no contractual allocation of risk.

Next time you are drafting or reviewing a contract consider what type of breach an unforeseen and calamitous event might cause your client to commit. Then ensure it is covered. You don’t want your client to be out of luck if that hypothetical future breach does not fall within the contract’s description of a breach that force majeure may excuse.

Narrow or inartful drafting may lead to onerous results.

Our Contract drafting course teaches how to draft clauses to get maximum benefit out of them. Contact us if you want to know about our Contract Drafting course.

Stay Safe!

?

?

?