Do you have a well drafted Force Majeure clause in your contracts? If not, then you are taking a massive risk… 

‘Force Majeure’ is French, meaning “superior force”. In a Contract, such a clause allows a party to suspend or terminate performance of their obligations when certain circumstances beyond their control arise, preventing them from performing the contract.

It can be difficult at law to prove a contract has been frustrated, and even if you do, this may not relieve the affected party from all their obligations. Accordingly, without a Force Majeure clause, you risk being in breach of the contract, and/or having to pay damages to the other party, despite the event being out of your control!

This is of particular importance for us North Queenslanders right now, during cyclone season. In fact, we are still cleaning up the mess (legally) and dealing with disputes over the non-performance of contracts during, and following, Cyclone Debbie last year.

Even if you do have a Force Majeure clause in your contracts, it is worth reviewing the wording – as the devil is in the detail and not all are made equal!

1.What does it cover?

It is important to define Force Majeure events in the contract with precision, to ensure certainty.

It is not possible in this article to go into detail of all events that should be included. Broadly though, common types of events include Acts of God (including fire, flood, cyclone, earthquake etc), war, riot, civil commotion, national emergency, strike and action or inaction of Government or other competent authority.

You should also think about whether you wish to include other events such as breakdown of supplied plant and equipment, shortage of labour, elevated gas levels, shortage of labour, shortage of fuel and industrial dispute.

2.What rights does it give?

Does the Force Majeure clause give you the right to suspend works? What if the Force Majeure event occurs for an extended period – does it give you the right to terminate?

Does the Force Majeure clause link to other clauses in the Contract, such as timeframes for performance, the liquidated damages clause and dispute resolution clause? That is, do the ‘key dates’ or ‘date for completion’ automatically extend by any delays as a result of a force majeure event?...if not, you could cop a hit for LDs.

3.What obligations are on the affected party?

This can be a double edged sword, depending on whether you may be seeking to rely on the clause, or the other party to the Contract may seek to use it.

Does the affected party have a duty to act reasonably in trying to bring the Force Majeure event to an end as soon as possible? How far does this extend? – e.g. to having to source alternative supply of services or labour at an additional cost.

For more information or to have your Force Majeure clause reviewed and updated, contact Suzanne Brown on 4963 0888 now.