Some thoughts on practical application of Force Majeure clauses.

Force majeure clauses are frequently seen in shipbuilding [1] and other contracts. Recent attempts by parties to invoke economic crisis as a force majeure events excusing performance has met with little success.

In Tandrin Aviation Holdings Limited v Aero Toy Store LLC and others [2], the court held at paragraph  40  “…under English law that a change in economic / market circumstances, affecting the profitability of a contract or the ease with which the parties’ obligations can be performed, is not regarded as being a force majeure event.  Thus a failure of performance due to the provision of insufficient financial resources has been held not to amount to force majeure - see The Concadoro [1916] AC 2 AC 199; and likewise a rise in cost or expense - see Brauer & Co. (GB) Ltd. v. James Clark (Brush Materials) Ltd. [1952] 2 All ER 497 and generally the discussion in Chitty on Contract, 30th Ed., para 14-148.”

Adams on Contract Drafting [3] states inter alia: “Thus far, courts continue to resist applying this contractual provision to even the most severe economic events. Nevertheless, courts have indicated a willingness to consider recessions as force majeure events if the parties intended such events to be covered by their contracts.”

It seems that the court’s interpretation of majeure clauses remains as usual, narrowly, with focus on actual contractual language.

There have also been various suggestions by distinguished professionals on how to draft and include economic crisis as a permissible delay or force majeure event in contractual documents.

In practice, the problem is two-fold; clarity and getting the other party to accept such language.  

[1] Clause 34, Bimco NEWBUILDCON, Article IX, Norwegian Standard Form SBC, Article 6, AWES Form, Article VIII, SAJ Form.
[2] [2010] EWHC 40 (Comm)

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