Force Majeure in times of war

It took just two days of conflict in the current military crisis in the region for us to receive a notice of force majeure on behalf of a client, issued by a contractor on an infrastructure project in Qatar. This short article highlights some of the important provisions and consequences when dealing with force majeure in construction contracts.

To all contractors out there currently engaged in projects in the Middle East, get that contract out of the bottom draw and dust off the pages to check the force majeure provisions. If there are notification deadlines, ensure that you meet these!! Even if, as we all hope, the war and hostilities are over very quickly, if you think that the war will impact on your ability to meet your contractual milestones, make sure that you trigger your rights within the contractual timeframes to avoid arguments at a later date. The impact of a force majeure event is considerable on all parties, and positions will be entrenched, so it is important to do everything by the contract. Issuing the notice within the periods prescribed in the contract will not commit you to enforcing your rights, but it will go a long way in protecting those rights.

It is also important to remember that force majeure, once invoked, will free both parties under the contract from their liabilities and obligations, and losses will lie where they have fallen. It is not a provision to be enforced lightly and without proper consideration of the consequences.

What is force majeure?

The term ‘force majeure’ – the literal meaning of which is "superior force" – has its origins in French civil law. Commonly, the term force majeure is a convenient ‘label’ used to refer to clauses which relieve a party from performance of its contractual obligations where that performance is impacted by events outside its control, such as war or natural disasters.

Why do you need a force majeure clause?

In the absence of express provisions in the contract, there are limited circumstances in which the law will come to the aid of a party whose ability to perform its contractual obligations is impacted by external supervening events. In the English common law this comes in the guise of frustration, while the Qatar Civil Code at Article 188 does include an express provision on force majeure. Notwithstanding, it is common practice to include in contracts a force majeure clause, to relieve a party from performance of its contractual obligations where that performance is impacted by events outside its control.

What form does a force majeure clause take?

In general, an effective force majeure clause will be made up of two main parts: the definition of what constitutes a force majeure event and the operative provisions which deal with what happens if there is a force majeure event.

Definition of force majeure event

The starting point for any force majeure clause is to define the force majeure event that will trigger the application of the clause. Some clauses opt for a very wide definition, referring to any ‘event or circumstances beyond the reasonable control’ of the party seeking to rely on the clause.

Another approach is to have an exhaustive definition which lists all the categories of events that are intended to be covered, for example, war, natural disasters such as earthquakes or floods, terrorist attacks, etc. The risk associated with such a prescriptive definition, however, is that the parties will not be protected by the force majeure clause if some completely unanticipated event occurs that the parties did not consider at the time they drafted the clause.

For this reason, the best approach in most cases is to have an inclusive definition, which lists the events that the parties envisage will be covered by the force majeure clause, but then includes a ‘catch all’ provision to ensure that the definition does not preclude the application of the clause to other similar events. In some cases it may be appropriate to be even more precise and specify that certain events will or will not be considered force majeure events in relation to one of the parties to the contract, but not the other.

A key point to remember is that while it would be unusual for the definition to require that the relevant event be unforeseeable (given that force majeure events are often foreseeable but cannot be prevented), the event must be one that is beyond the control of the party.

Impact of the force majeure event

If there is in fact in existence an event which falls within the relevant definition of force majeure event, the party seeking relief from performance will generally be required to show that:

• it was prevented, hindered or delayed from performing its contractual obligations as result of the event;
• the event/inability to perform was beyond its control; and
• there were no reasonable steps the party could have taken to avoid the event or the consequences (see discussion of mitigation below).

The party claiming force majeure must show that performance of its obligations was legally or physically impossible, not just more expensive than what was originally anticipated.

Reporting obligations

A force majeure clause will usually provide that the party seeking to rely on the force majeure clause must notify the other party of the fact that the force majeure event is impeding its performance within a specified time frame. The notice will usually be required to include detailed information about the force majeure event and its impact on the party's ability to perform its obligations. Often the notification requirement will be a condition precedent to the ability of the party to rely on the relief provided for under the clause. For this reason, it is important that all procedural requirements are complied with, as failure to do so could bar a party from relying on the clause.

Mitigation and causation

Even if the clause does not expressly impose an obligation on a party to take mitigation measures, in practice the party may still need to show that it could not mitigate the effects, to demonstrate that the force majeure event actually caused the party to be unable to perform its obligations under the contract. Therefore, if alternative modes of performance are provided for under the contract but have not been pursued by a party to mitigate or prevent the impact of the force majeure event, it becomes less likely that a court will consider a party's non-performance attributable solely to the force majeure event.

Consequences

The force majeure clause will also need to deal with what the parties intend to happen if it is accepted that a force majeure event has prevented a party from being able to perform its obligations. Typically, the clause will provide that the parties' obligations under the contract will be suspended until such time as the force majeure event (and its direct effects) have ceased to prevent performance of the contract. Most clauses will provide that if the impact of the force majeure event is not lifted within a certain time, for example 6 or 12 months, then the parties will have the right to terminate the contract. In such case, losses will be borne by each party itself with no right to recover from the other party.