You have managed to read through pages and pages of legal drafting documenting your commercial arrangements which you are keen to get started on as soon as possible. With several more pages of Schedules (where the real commercial nitty gritty lies) still to be checked, you reach the ‘standard’ or ‘boilerplate’ clauses. Tempted to skip over them? Perhaps think again... Many commercial parties have come unstuck in the last 9 months since the Covid-19 pandemic hit the world as they wrongly thought that, due to Covid-19 and the impact it had on businesses and supply chains, they would be excused from performing their contracts or be able to walk away from them. Many realised that they did not have a so-called ‘force majeure’ clause in their contracts at all or, if they did, the situations set out in it which would excuse or suspend performance of the contract or even terminate it did not cover the Covid-19 fact pattern.
With further potential touch points for force majeure starting to mount (in particular a no-deal Brexit and climate ‘emergencies’, such as major flooding) this article focusses on what impact Covid-19, a no-deal Brexit and climate ‘emergencies’ are having on the drafting of force majeure clauses.
It is important to realise that (unlike some Civil jurisdictions) English law has no general rule of force majeure and will not imply a force majeure provision into a contract that does not expressly include one.
This means that for a party to be able to suspend or be excused performance of its obligations under a contract (or terminate the contract for force majeure) the contract must have that right expressly embedded into it. If there is a force majeure clause, it is a matter of the precise wording, interpretation and application to the facts as to whether the clause can be relied upon.
The normal rules of contract interpretation will be applied by the courts (giving words their natural meaning and looking to previous decisions) meaning that they will be interpreted narrowly looking at the drafting rather than what the parties intended.
Remember though that force majeure is designed to relieve/suspend performance of a contract or allow a party to terminate it because the event in question has caused the contract to be unworkable (has prevented, delayed or hindered performance); it is not enough that performance is more difficult, unreasonable or more costly.
Since March 2020, force majeure clauses are being scrutinised and negotiated far more than ever before.
We have observed the following trends:
Invoking force majeure clauses has the potential to become even more complicated if the contract is international in nature, for example, because one of the contracting parties is not an English company or perhaps the goods in question are from outside the UK.
Some countries, including Civil jurisdictions such as France, do have a defined concept of force majeure and, depending on the contract and the specific circumstances these might apply.
With Covid-19 effects on businesses still raging and the prospect of a no-deal Brexit (with all the disruption that will follow) looming as well as climate ‘emergencies’ on the rise, contracting parties skip over force majeure provisions at their peril. Force majeure clauses should merit as much scrutiny as other operative provisions within a contract and not just consigned to the ‘boilerplate’ rubbish heap.
Parties should really think about what events should amount to force majeure and, in the context of foreseeable events (such as Covid-19 and Brexit), specific drafting to deal with the situation expressly should be drafted and should state whether the event has to be unforeseeable to enable it to be triggered or not.