Force Majeure In Construction Contracts
Force Majeure in Construction Contracts (Construction Law & Arbitration)
1. Concept and Importance
In construction contracts, a force majeure clause allocates the risk of unforeseeable events that disrupt project performance—such as natural disasters, war, pandemics, or government restrictions.
Construction projects are particularly vulnerable due to:
Long timelines
Complex supply chains
Dependence on labour, materials, and permits
Function:
To determine whether the contractor is entitled to:
Extension of time (EOT)
Cost compensation
Suspension or termination
2. Standard Forms and Force Majeure
(A) FIDIC Contracts
Use the term “Exceptional Events” (formerly force majeure)
Provide:
EOT
Cost compensation (in limited cases)
Termination rights
(B) NEC Contracts
Use “Compensation Events”
Focus on:
Risk-sharing
Early warning mechanisms
(C) JCT Contracts
Recognise force majeure as a relevant event
Usually grants:
Extension of time
But no automatic cost recovery
3. Essential Elements in Construction Context
(A) Defined Event
Must fall within clause wording
E.g., “acts of God,” “government action,” “epidemics”
(B) Causation
Event must delay or prevent construction works
(C) Beyond Contractor’s Control
No fault or negligence by contractor
(D) Mitigation
Contractor must:
Reallocate resources
Seek alternative suppliers
(E) Notice Requirements
Strict compliance required:
Delay notices
Particulars of claim
4. Legal Consequences in Construction Contracts
(A) Extension of Time (EOT)
Prevents contractor from:
Being liable for liquidated damages
(B) Cost Compensation
Depends on contract:
FIDIC → sometimes allowed
JCT → usually excluded
(C) Suspension of Works
Temporary halt of obligations
(D) Termination
If event persists beyond specified period
5. Key Legal Issues
(i) Delay vs Prevention
“Prevent” = strict impossibility
“Delay/hinder” = broader interpretation
(ii) Concurrent Delay
Force majeure + contractor delay
Complex apportionment issues
(iii) Supply Chain Disruption
Whether subcontractor failure qualifies
(iv) Foreseeability
Increasingly relevant post-COVID
6. Key Case Laws
1. Taylor v Caldwell (1863)
Principle: Frustration due to impossibility
Music hall destroyed
Relevance: Applies where no force majeure clause exists
2. Davis Contractors Ltd v Fareham UDC (1956)
Principle: Increased difficulty ≠ frustration
Construction became more expensive but not impossible
Relevance: High threshold for relief
3. Tsakiroglou & Co Ltd v Noblee Thorl GmbH (1962)
Principle: Alternative performance
Closure of Suez Canal did not frustrate contract
Relevance: Contractor must explore alternatives
4. Channel Island Ferries Ltd v Sealink UK Ltd (1988)
Principle: Strict interpretation of force majeure
Clause applied narrowly
Relevance: Drafting precision critical
5. Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970)
Principle: Prevention principle
Employer-caused delay prevents enforcement of liquidated damages
Relevance: Interacts with force majeure and delay claims
6. Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd (2007)
Principle: Extension of time and contractual mechanisms
EOT clauses must be properly followed
Relevance: Notice and procedural compliance essential
7. Seadrill Ghana Operations Ltd v Tullow Ghana Ltd (2018)
Principle: Prevention and causation
Must show event actually prevented performance
Relevance: Key for construction delay claims
8. Classic Maritime Inc v Limbungan Makmur Sdn Bhd (2019)
Principle: “But-for” causation
Event must be the real cause of non-performance
Relevance: Applies to construction supply disruptions
7. Practical Operation in Construction Projects
Step-by-Step
Event Occurs
E.g., flood, pandemic, government ban
Notification
Contractor issues notice within contractual timeframe
Assessment
Engineer/contract administrator evaluates claim
Evidence Submission
Delay analysis
Site records
Programme updates
Determination
Grant of EOT and/or costs
8. Corporate and Commercial Implications
(A) Risk Allocation
Determines who bears:
Delay risk
Cost overruns
(B) Project Financing
Delays impact:
Cash flow
Loan obligations
(C) Dispute Resolution
Commonly resolved through:
Arbitration
Adjudication
(D) Supply Chain Management
Contractors must:
Diversify suppliers
Maintain contingency plans
9. Challenges in Practice
Proving causation
Managing concurrent delays
Strict notice requirements
Disputes over cost entitlement
Complex expert evidence
10. Best Practices
Draft clear force majeure clauses
Include pandemics and government actions
Maintain detailed site records
Issue timely notices
Use delay analysis techniques
Engage legal and technical experts early
11. Conclusion
Force majeure in construction contracts plays a critical role in managing project risks arising from unforeseen events. However, courts and tribunals consistently adopt a strict and evidence-based approach, focusing on:
Contractual wording
Actual causation
Compliance with procedural requirements
Case law demonstrates that relief is not automatic—contractors must prove entitlement rigorously.
For construction stakeholders, effective use of force majeure requires careful drafting, proactive contract management, and strategic dispute resolution planning.
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