22.2 FORCE MAJEURE CLAUSE

22.2.1 Introduction

Force majeure clauses, often very detailed, are almost invariably included in international business contracts, irrespective of their proper or selected governing law.  ¹³⁰²  They only have relevance, however, if they differ from the doctrine of force majeure that would be applicable without the existence of such a clause.  ¹³⁰³  In this respect, force majeure clauses that parties include in their contracts either supplement the governing law or limit or supplant the default rule thereof. It seems clear that, when provision is made to anticipate the consequences of force majeure events, the parties tend to depend much more on the terms of their agreement than an the subjacent rules of the system of law applicable to the contract.  ¹³⁰⁴ 

Under most circumstances, parties should include a force majeure clause in their contract to provide greater predictability and more appropriate protection than the doctrine of excuse governing the transaction -- usually CISG Art. 79. Force majeure clauses can provide increased protection for clients in several ways. For example, Art. 79 CISG does not explicitly state whether an impediment excuses performance if partial performance is possible. Thus, the parties could draft a force majeure clause that explicitly states that a party must perform to the extent possible. By negotiating the issue of partial performance in advance, parties can avoid expensive litigation down the road. Similarly, parties could include a force majeure clause to overcome the obstacle of foreseeability. To some extent, every impediment is foreseeable; and where certain situations or "impediments" are foreseeable, parties generally assume their risk unless explicitly allocated in the contract. Therefore, since a force majeure clause in a CISG contract may limit or supersede the applicability of Art. 79, parties could negotiate force majeure excuses without regard to foreseeability. Thus, even if a party could not claim excuse under Art. 79 -- because the impediment was foreseeable the party could be excused by an event delineated in the force majeure clause. The illustrations provided above do not exhaust the benefits that force majeure clauses provide for international contracts. Force majeure clauses can be tailored to meet the needs of parties, to account for exceptional circumstances, and to compensate for inadequate protection by the applicable doctrine of excuse.  ¹³⁰⁵ 

However, in order to protect clients, practitioners should negotiate and draft the clauses very carefully. In particular, practitioners should consider the following tips when drafting force majeure clauses: force majeure clauses are generally drafted in such a way as to offer a definition of the concept, followed by a non-exhaustive list of the events agreed upon by the parties as constituting force majeure. Furthermore, a duty of notification, obligating the affected party to give notice of the force majeure event, is often provided. Finally, force majeure clauses set out the legal effect of a force majeure situation.

22.2.2 Drafting Considerations

Drafters must firstly decide whether to list specific force majeure events, include a "catchall" category, or both.  ¹³⁰⁶  It is the recommended and usual practice that force majeure clauses, after defining the concept in a catch-all provision, set out a non-exhaustive list of agreed force majeure events.  ¹³⁰⁷  Examples of traditional events contained in such lists are tornadoes, lightning, floods, fires, earthquakes, and unusually severe weather conditions.  ¹³⁰⁸  The list of specific force majeure events included in international contracts has evolved in such a way as to include impediments to the ability of the parties to fulfill their obligations. These are in addition to the classical events of natural calamities and wars, and may be the result of: (a) the increasing participation of States or their entities in business activities (authorisations, approvals, concessions and regulations), or (b) turmoil of a social nature (strikes, lock-outs).  ¹³⁰⁹  When the laundry list approach is utilized, the drafter should consider phrasing it as "including, but not limited to ..." Otherwise, a court could interpret the clause as excluding any event not specifically listed in the clause.  ¹³¹⁰  On the other hand, the drafter could state that the catchall provision covers "any other event, whether or not similar to the causes specified above." The drafter could avoid leaving room for judicial discretion in the laundry list approach by listing very precise events. However, drafters should remember that under the ejusdem generis rule of construction "general words following specific ones will be given a limited meaning." Therefore, if the force majeure clause enumerates contingencies (i.e., a laundry list), the drafter must be very comprehensive. As an alternative, the force majeure clause could delineate excusing effects rather than excusing events.  ¹³¹¹ 

Secondly, the force majeure clause should explicitly state what the performing party must do in order to properly invoke the clause.  ¹³¹²  For example, the clause may require that a party that wishes to be excused from performance under the clause give prompt notice of such an intention to the other party, unless the other party has actual notice. Failure to provide such notice often results in drastic consequences where one cannot rely on the clause to excuse non-performance. Such a situation, however, is not thought to result automatically from a failure to provide timely notice; there is usually an express provision in the contract.  ¹³¹³  Moreover, where notice is required, the drafter should address other notice issues, including: (1) when the excusing event is deemed to have occurred, i.e., when the duty to give notice arises; (2) time limits; (3) whether notice must be written; and (4) whether notice becomes effective on dispatch or upon receipt, etc.

Thirdly, the drafter should resolve any uncertainty as to the consequences of a situation of force majeure, which is generally to imply a disclaimer of liability for the effects of such an event. Generally, the promisor is not liable for damages where force marjeure exists. However, e.g., it cannot be determined with sufficient security how the right to performance can be affected by the impediments under Art. 79 CISG. Unlike most municipal laws which adopt the notion of force majeure, in international trade practice force majeure does not necessarily result in the termination of the contract. More often, in international trade practice there is provision for two stages with respect to the effect of force majeure. In the first stage, either the duty to discharge the obligation is suspended for the duration of the force majeure condition or the time of performance of the contract is extended for a specific period. If the event which constitutes force majeure is permanent or continues after the expiration of that period, each party is entitled to terminate the contract. If the force majeure condition ceases before the expiration of the additional period of time, however, the contract revives without consequences.  ¹³¹⁴  Drafters should use very clear language when dealing with these issues so as to make their intention clear.

In short, in defining force majeure clause, the drafter should resolve any uncertainty left by default rule, e.g. Art. 79 CISG. Drafters should use very clear language and define the scope of the force majeure clause to avoid leaving a gap in the clause.