Out-Law Guide 4 min. read
25 Aug 2011, 4:57 pm
In a sense, a force majeure clause in a construction contract is a sort of contingency plan.
When drafting a contract, it is sensible to consider how it would deal with, for example, a pandemic that led to mass staff absences. The first topic that springs to mind is time:
The standard forms
In relation to all contracts, pay close attention to specific notice requirements and any duty to mitigate the impact of the force majeure event, as a failure to comply with these requirements will probably mean that you are unable to benefit from force majeure provisions.
FIDIC White Book: the clause relevant to this example refers to "unforeseeable shortages in the availability of personnel... caused by epidemic". The word "unforeseeable" could be a bit difficult here – even where a virus, for example, has peaked there is a high possibility that it will come back. If you are a consultant negotiating on this form, it might be a good idea to cross out the word "unforeseeable".
ICE Design and Construct Contract: the relevant clause refers to "other special circumstances of any kind whatsoever which may occur". This is helpful to contractors, but leaves the question of what it is about the circumstances that makes them "special".
NEC3: the relevant clause talks about an event which "stops the Contractor completing the works by the date shown on the Accepted Programme" and which:
Again this is helpful to contractors, but the last words may prove troublesome in an application for an extension of time in a contract signed now, when pandemics and volcanic ash disruption in particular occur with such regularity that it would be difficult to write them off as having "such a small chance" of occurring. How do you "allow for" the possibility of a flu pandemic predicted for the autumn? If you put an extra month into your programme, what if there is no pandemic?
JCT 2005 Design and Build: this contract lists relevant events for extension of time claims:
Other standard forms: as you can see from the above, each different standard form treats force majeure differently. Careful reading will be required, and bespoke clauses should be created if necessary.
A force majeure clause with a list of examples is obviously better than one without – providing the clause you want to rely on is on the list. However no list will ever cover every situation, so some people prefer to define 'force majeure' generally as acts and events beyond the control of the parties rather than listing specific examples and then argue the point when a problem arises. The difficulty here is that force majeure is not a legal term and is open to interpretation. The party who wishes to rely on the clause will have to convince the adjudicator or court that their circumstances fall within force majeure.
Despite the above, one point which is worth mentioning is that force majeure will always be seen as beyond the control of the affected party. This is not the same as unforeseeable, as under some of the standard forms considered above. However, you will need to show that – even if you had done all that was to be reasonably expected of someone in your position – you would still have been affected.
In an individual case the parties, court or arbitrator will look at whether something is or is not force majeure based on the facts before them. It will always be worth looking to see if any other clause in the contract can assist you.
Anti-force majeure clauses and emergency services
Most employers are willing to concede that the contractor will be unable to perform its obligations in a 'genuine' force majeure situation. What they are mainly worried about is a force majeure clause being used in a situation that is purely commercial in nature, or that could have been avoided by taking reasonable precautions.
However there are some situations where even 'genuine' force majeure is not going to be regarded as sufficient cause for failure to perform. This is the case in the area of essential services. Included in this category are the emergency services, their facilities and suppliers, healthcare and caring professions as well as essential industries such as water and sewage treatment, power supply, waste collection, telecommunications, certain parts of Government and the military.
Where services fall into this category, the force majeure clauses tend to look very different. They focus on the parties getting together to decide what can be done rather than arguing about what can't; and on being able to suspend certain procedures if, for example, the post, internet and telephone lines go down.
What to do
The emergency services approach above is not a bad place to start if you do find that your project is affected by a crisis. If you are affected, it is well worth spending time discussing with your suppliers and clients what can be done - rather than what can't - with a view to coming up with an agreed way forward rather than a dispute.