Force Majeure Clauses Corporate Analysis.
1. Legal Nature of Force Majeure Clauses
A. Purely Contractual Doctrine
Under English law, force majeure has no automatic application—its effect depends entirely on:
The wording of the clause
The allocation of risk agreed by parties
Key Principle:
Courts interpret strictly but commercially, focusing on the parties’ intentions.
2. Core Components of Corporate Force Majeure Clauses
A. Definition of Force Majeure Events
Typically includes:
Natural disasters (floods, earthquakes)
War, terrorism
Government actions, sanctions
Pandemics and epidemics
Supply chain disruptions
Case Law:
Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323
Events must fall within the express wording; foreseeability may undermine reliance.
B. Causation Requirement
The event must cause the non-performance.
Case Law:
Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102
Introduced a strict “but for” causation test—the party must prove it would have performed but for the event.
C. Degree of Impact: Prevention vs Hindrance
| Clause Term | Legal Effect |
|---|---|
| Prevented | Performance impossible |
| Hindered | Substantially more difficult |
| Delayed | Temporarily obstructed |
Case Law:
Tennants (Lancashire) Ltd v G.S. Wilson & Co Ltd [1917] AC 495
Mere difficulty or expense is insufficient where “prevented” is required.
D. Mitigation and Reasonable Endeavours
Parties must take reasonable steps to avoid or mitigate the effects.
Case Law:
Bulman & Dickson v Fenwick & Co [1894] 1 QB 179
Obligation to explore alternative means of performance.
E. Notice Requirements
Corporate clauses typically require:
Prompt notice of the event
Ongoing updates
Evidence of impact
Failure to comply may invalidate reliance.
Case Law:
Bremer Handelsgesellschaft mbH v Vanden Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep 109
Strict compliance with notice provisions is essential.
F. Consequences of Invocation
Depending on drafting:
Suspension of obligations
Extension of time
Termination after prolonged event
Case Law:
Seadrill Ghana Operations Ltd v Tullow Ghana Ltd [2018] EWHC 1640 (Comm)
Force majeure may justify suspension but not necessarily termination unless expressly provided.
3. Key Corporate Legal Issues
A. Foreseeability and Risk Allocation
If an event was foreseeable, courts may find:
Risk was assumed by the parties
Case Law:
Channel Island Ferries v Sealink (1988) – Foreseeability undermines reliance.
B. Self-Induced Force Majeure
A party cannot rely on force majeure if:
Its own actions contributed to the failure
Case Law:
The Super Servant Two [1990] 1 Lloyd’s Rep 1
Failure to use available alternatives defeats the claim.
C. Economic Hardship vs Impossibility
Increased cost or reduced profitability is insufficient.
Case Law:
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93
Closure of the Suez Canal did not excuse performance where alternative routes existed.
D. Interaction with Frustration Doctrine
If no clause exists, parties may rely on frustration, but:
Threshold is higher
Contract is automatically terminated
Case Law:
Davis Contractors Ltd v Fareham UDC [1956] AC 696
Mere hardship does not amount to frustration.
E. Supply Chain Disruptions
Corporate contracts often face:
Supplier failures
Logistics breakdowns
Key Principle:
Upstream failure is not automatically force majeure unless covered by clause wording.
Case Law:
Classic Maritime (2019) – Supplier failure insufficient without causation.
F. Pandemic and Government Action
COVID-19 highlighted:
Importance of explicit wording (e.g., “pandemic,” “government restriction”)
Interaction with statutory lockdowns
Case Law:
Salvage Association v CAP Financial Services Ltd (1995) (analogous principles)
External regulatory actions may qualify if expressly covered.
4. Drafting Considerations for Corporations
A. Broad vs Narrow Clauses
Broad clauses: easier to invoke, greater flexibility
Narrow clauses: higher certainty, stricter thresholds
B. Key Drafting Elements
Exhaustive vs non-exhaustive event list
Clear causation language
Express mitigation obligations
Detailed notice provisions
Defined termination rights
5. Risk Allocation in Corporate Practice
| Risk Area | Allocation Strategy |
|---|---|
| Supply chain disruption | Include supplier failure clauses |
| Regulatory change | Include “change in law” provisions |
| Pandemics | Explicit inclusion in event list |
| Financial hardship | Usually excluded |
| Delay risk | Extension of time clauses |
6. Remedies and Outcomes
Suspension of obligations
Extension of deadlines
Termination rights
Exclusion of liability for non-performance
7. Key Case Law Summary
Classic Maritime v Limbungan (2019) – Strict causation requirement
Seadrill v Tullow (2018) – Effective cause and contractual consequences
Channel Island Ferries v Sealink (1988) – Foreseeability and clause scope
The Super Servant Two (1990) – Self-induced impossibility
Tsakiroglou v Noblee Thorl (1962) – Economic hardship insufficient
Bremer Handelsgesellschaft (1978) – Notice compliance
Tennants v Wilson (1917) – Prevention vs difficulty
Davis Contractors v Fareham (1956) – Frustration comparison
8. Conclusion
Force majeure clauses are critical corporate risk-management tools that:
Allocate responsibility for extraordinary events
Protect against uncontrollable disruptions
Provide structured remedies
However, courts apply strict, evidence-based analysis, focusing on:
Precise drafting
Causation and mitigation
Commercial intent of parties
The case law shows that successful reliance depends less on the event itself and more on how the clause is drafted and applied in practice.
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