Force Majeure:

Defining ‘Force Majeure’ in a post-Covid landscape

In 2020, the Covid-19 pandemic tanked economies, disrupted global supply chains and brought businesses to their knees. With the advent of regulations enforcing social distancing and working from home, organisations have been scrutinising con – tracts with suppliers and partners to find out how their rights and obligations are affected, particularly when it comes to an altogether difficult-to-pin-down concept: force majeure.

In simple terms, force majeure refers to a supervening event that frees both parties within a contract from liability and obli – gation to fulfil their duties under that contract, since the event in question has made fulfilling those duties impossible. Whether they are natural disasters such as hurricanes, storms and earth – quakes (a so-called ‘Act of God’), or man-made events such as war and strikes, the binding aspect of force majeure events is that they are outside of the parties’ control.

In this sense, we understand the concept and intention of force majeure. However, as this month’s discussion from IR Global explores, how a force majeure event is actually defined depends on the jurisdiction and the parties involved. There is no statutory or common law definition of force majeure or force majeure event in English law, which means it is up to parties to set out in their contract all the terms governing their relationship.

For businesses entering into any contract, this can create a major difficulty. Under what criteria do we claim that a force majeure event is ‘foreseeable’? To what extent does an event need to disrupt a party’s performance of their duties before we can adequately say it is a force majeure event? And what should the consequences be if parties are in agreement that a force majeure event has occurred?

Is force majeure more relevant now than ever?

With endless lockdowns keeping workers at home, Covid-19 has reignited the conversation about what should be consid – ered a force majeure event. After countries closed their borders, airlines examined whether they can exercise force majeure clauses in their contracts to avoid refunding consumers for delayed or cancelled flights. Meanwhile, construction compa – nies forced to have fewer staff on-site due to social distancing regulations are exploring whether they can point to ‘extraordi – nary circumstances’ to free themselves from their obligations.

In some cases, force majeure is at the heart of globally reported controversies. In May 2021, the UK government suggested using the concept of force majeure to free itself from obligations to apply the Northern Ireland Protocol, a key aspect of the Brexit Withdrawal agreement under which certain goods need to be checked as they move from Great Britain to Northern Ireland. In another major case in April 2021, French energy group Total declared force majeure on its $20 billion liquefied natural gas project in Mozambique – designed to revamp the country’s economy – due to attacks in the region linked to IS.

With force majeure being an issue on the global stage, it’s even more important to discuss how force majeure should be defined, as well as how it can be deployed. It’s also worthwhile to discuss key differences between force majeure and the doc – trine of frustration, another method by which parties may free themselves from contractual obligations due to an unforeseen event. For example, frustration may not need to be included in a contract for parties to invoke it (unlike a force majeure clause) but the threshold for whether an event counts as frustration might be considerably higher than for force majeure.

As several IR Global members state in the discussion to come, it’s extremely important that contracts are clear and precise when referring to force majeure events and what the ramifications of such an event should be. In the following pages, we discuss the various complexities involved with defining force majeure, what potential remedies there are in case of a force majeure event, and how frustration may be applied in certain jurisdictions.