Force Majeure

What is Force Majeure?

Force majeure is a civil law concept and equivalent counterpart of frustration in contracts under common law. Although the origin of the concept is Roman, it was adopted by civil law countries and is most notably found today in the French Civil Code (the Napoleonic Code) dating back to 1804.’

A force-majeure event, when it occurs, excuses the performance of the contract in spite of its express provisions obligating the parties to perform. It is one of the several other exceptions that excuse the parties from the performance of the contract.

French law requires no less than three criteria to be satisfied before an event can be considered one of force majeure:

(a) unpredictable,
(b) uncontrollable, and

(c) external.

(a) Unpredictability

If the event could be foreseen at the time of entering into the contract, it should have been provided for in the contract and the relying party is expected to have prepared for it or insert such event in the definition of force majeure under the contract. A party’s failure to
Specifying a foreseeable risk gives an assumption that the party intended to take such risk at the time of entering into the contract.

(b) Externality

The event must not be attributable to the fault of the relying party, and the relying party must have had nothing to do with its occurrence.

(c) Irresistibility

The event must be insurmountable and the relying party could not have done anything to mitigate it or avoid its occurrence. Financial difficulty or economic hardship does not excuse non-performance as contracting parties are expected to have reasonable business acumen and are expected to have calculated the economic risks of entering into particular contractual obligations.

In other words, the courts must be satisfied that the contract’s performance has become impossible because of an event that could not have been foreseen by the parties at the time of making the contract. The performance must be impossible and not merely onerous or impractical. The French courts, until 1914 were extremely reluctant to accept an event as force majeure and safeguarded the principle of the sanctity of the contract. Owing to World War I in 1914, one could observe a general trend in French courts to end contracts and end obligations.However, the French Court of Cassation has never openly accepted the principle’s relaxation and maintained its intent to protect the sanctity of contracts.

This principle was recently relied on in the case of Maralex Resources Incorporation v. Gilbreath (2003) whereby the Supreme Court of New Mexico stated that .. “applying this doctrine, we look to the specific terms employed and seek the common characteristics among them, excluding anything that does not share those characteristics”.

This means that if the list specifies events such as natural disasters, wars, government decisions followed by a catch-all phrase stating ‘any other event beyond the reasonable control‘, it would be interpreted to have meant analogous events similar in characteristics and interpreted in the light of the specific list of events. Therefore, it is pertinent for the draftsmen to attain the right balance between specificity and broadness of the force majeure clause.

Force-Majeure Clauses and Catch-All Phrase

A force-majeure clause is purely a creation of a contract, thereby entailing an application of the general principles of contractual interpretation.

A typical definition of a force-majeure clause contains catch-all phrases to extend the exemption of liability. Examples of such catch-all phrases are “including but not limited to” and “any other event beyond the reasonable control of parties“. As appealing as these phrases seem to a party relying on it, it is ultimately an example of poor drafting by lawyers for the reasons mentioned below. Courts require specificity in the list of events if they ought to exempt the parties from the liability.

Pursuant to the doctrine of ejusdem generis which literally means ‘of the same class’, in some circumstances the use of catch-all phrases might actually prevent a party from relying on an event which in the absence of the ‘catch-all’ phrase could have successfully amounted to a force-majeure event.

If the force majeure clause specifically covers the relying event, then the parties have a better chance to excuse themselves of further obligations as they have explicitly agreed in the contract to this condition. A court would uphold the sanctity of the contract and the freedom of the parties to define the parameters of their obligations as they see fit. The court cannot go contrary to explicit clauses in order to make the contractual bargain fairer. A court would only go contrary to a clause should it contain illegality, in which case the illegal clause can be severed from the contract.