FORCE MAJEURE CLAUSE
Abdul Aziz
Hussin AMN
Universiti
Sains Malaysia
Keywords: Delay –
Relevant Events – Frustration – No breach of contract – Beyond Control – Effects.
Abstract
One of the
clauses in the construction contract agreements is regarding force majeure.
This clause (or sub-clause) should be defined clearly in order to get its true
scope of coverage. The said clause, in several events, may be used successfully
to all parties in the contract in order to avoid liabilities relating to the
breach of contract.
Most
of the construction agreements, especially those in the standard forms of
contracts, consist a clause (or sub-clause) known as “force majeure
clause”. Therefore it is a must to all
parties in the contract to know the precise definition, scope of its usage and
limitation of the said clause. This
article will study all of this aspects, especially of its scope, and to what
extend the parties in contract may make use of this clause for their benefits.
WHAT
IS “FORCE MAJEURE”?
As
stated by Turner, D.F.(1987), “force majeure” is not a phrase native to
English or Scots Law, and actually is a French law term (Powell-Smith, V &
Sims, J. 1988). A very brief definition
for force majeure is, “irresistible compulsion or coercion” (Mozley
& Whiteley’s Law Dictionary, 1977).
As
further stated by Turner, D.F. (1987) and Powell-Smith, V & Sims, J. (1988)
the term is wider in its meaning than the common law term “Act of God”,
but its meaning is imprecise. It refers
to exceptional matters or events beyond the control of either party. In other words, its refers to any
overwhelming superhuman event (as stated in the case of Oakley v. Portsmouth
& Ryde Steam Packet Co. (1859) ).
Lebeaupin
v. Crispin (1920) Mc Cardie, J.
said:
“This
term is used with reference to all circumstances, independent of the will of
man, and which it is not in his power to control….”.
THE
EXISTENCE
If
we refer to most standard forms of construction contracts, we can find this force
majeure clause. Those who are using
PWD 203 (or 203A) standard form of contract, clause 43(a) is relevant. According to clause 43(a), upon it becoming
reasonably apparent that the progress of works is delayed, the contractor shall
forthwith give written notice of the causes of delay to the Superintending
Officer, and if the completion of the works is likely to be delayed or has been
delayed by force majeure (or any other reasons stated in that clause)
then the Superintending Officer shall extend the time for completion of the
works.
For
those who are using PAM 1998 standard form of contract, the force majeure
clause appears in clause 23.7(i) (the clause relating to “Relevant Events” causing
delay where the contractor may be given a fair and reasonable extension of
time).
The
equivalent provision is also appears in clause 24.1(a) of CIDB 2000 standard
form of contract (i.e. the Superintending Officer may extend the time for
completion if the delay caused, inter alia,
by force majeure).
The
force majeure clause is also appears in JCT 1980 standard form of
contract (clause 25.4.1) and IFC 1984 standard form of contract (clause 2.4.1).
THE
SCOPE AND ITS APPLICATION
Again,
in Lebeaupin v. Crispin (1920) McCardie, J. said further,
“….Thus
war, inundations and epidemics are cases of force majeure; it has even been
decided that a strike of workmen constitutes a case of force majeure”.
He
added further that any direct legislative or administrative interference would
come within the term: for example, an
embargo. In the case of Matsaukis v
Priestman & Co. (1915), the dislocation of business caused by the
general coal strike and breakdown of machinery are instances of force
majeure, In Berney v Tronoh
Mines Ltd. (1949), the contract of service of the plaintiff was discharged
by frustration due to Japanese invasion in Malaya and the court ruled that
there was no breach of contract by the defendants. The event of Japanese invasion is an example of force majeure. Per Mr. Justice Mc Cardie in Lebeaupin v.
Crispin & Co. (1920):
“This
term [i.e. force majeure] is used with reference to all circumstances
independent of will of man, and which is not in his power to control….Thus was,
inundations and epidemics are cases of force majeure; it has even been decided
that a strike of workmen constitutes a case of force majeure”: [But] a force majeure clause should be
construed in each case with a close attention to the words which precede or
follow it and with due regard to the contract.
The effect of the clause may vary with each document.”
The said judge added further that ‘any direct
legislative or administrative interference would, of course, come whithin the
term: for example, an embargo’.
Although in Matsoukis v Priestman & Co.
(1915) the term force majeure was held to apply to dislocation of
business caused by a nation-wide coal strike and also accidents to machinery,
but according to Justice Bailhache in the said case, that it did not cover
delay caused by bad weather, football matches or a funeral because ‘these
are the usual incidents interrupting work and the defendants, in making their
contract, no doubt took them into account’. However in Tennants (Lancashire) Ltd, v. C.S. Wilson & Co.
Ltd. (1917) there was a condition ( a clause) in the contract which
provided that ‘deliveries may be
suspended pending any contigencies beyond the control of the sellers or buyers
(such as…war….) causing a short supply of labour, fuel, raw material, or
manufactured produce, or otherwise preventing or hindering the manufacture or
delivery of the article’ , and it was held that this is a force majeure
clause.
In
conclusion, Powell-Smith, V. and Sims J. (1988) state that the best can be said
is that the event relied upon as force majeure must make the performance
of the contract wholly imposibble.
The
writer also of the thinking that the impossibility of performance could be
temporarily or for a long time, or forever.
By
referring to the case of Hong Guan & Co. Ltd. v. R.Jumabhoy & Sons
Ltd. (1960), Sinnadurai, V. (1979), states that in contracts which has a force
majeure clause, the Court will look into the construction of the clause to
determine whether such a clause is wide enough to cover the contingency.
EFFECTS
TO THE PARTIES
From
the discussion above, it shows very clear that the force majeure clause
gives great effects to all parties involve in the contract. Therefore the form and scope of the said force
majeure clause should be read and defined or construed clearly. As mentioned by Sinnadurai, V. (1979), since
the clause can be differently drafted they may assume a variety of forms. Such clauses should be construed in the
light of the precise words used and with due regard to the nature and general
terms of the contract. For example, in
the case of C. Czarnikow Ltd. v. Centralla Handlu Zagranicznego Rolimpex
(1977) the English Court of Appeal held the defendants could in the
circumstances of the case rely upon a force majeure clause which
provided that if delivery was prevented, inter alia, by ‘government
intervention…. beyond the seller’s control’ the contract would be void without penalty.
Furthermore,
according to Simon, M. S. (1989), some delays, commonly referred to as
excusable delays, grant extensions of time without any additional compensation
[or penalty or damages]. The excusable
delay extension of time is often found in a force majeure clause. According to Abrahamson, M.W (1979), force
majeure clause may relieved the contractor and the employer from liability
for delays due to strikes, etc., and other causes beyond his control.
In
the case of Hong Guan & Co. Ltd. v. R. Jumabhoy & Sons Ltd.
(1960), Mr. Justice Lord Morris of Borth-Y-Gest said,
“So
far as the clause deal with force majeure it appears to be designed to protect
the respondents from liability in the event of their being prevented from
performing the contract by circumstances beyond their control”.
Force
majeure clause also applicable to
sub-contractors if it appears in the sub-contract agreement.
If
any case, the burden of prove that any event that so mentioned is within the
scope of force majeure clause is on the applicant (ie. the
contractor or the sub-contractor). Or,
alternatively, all the parties in the contract agree on the matter.
The
effects of force majeure are also mentioned and ellaborates further in sub-section
57(2) of Contract Act 1950 and Illustrations
(b) (d) and (e) of the said section.
According to this sub-section, a contract to do an act that become impossible is void. The full text of sub-section 57(2) and Illustrations
(b) (d) and (e) (which are relevant to force majeure) are as
follows:
57(2)
A contract to do an act which, after the
contract is made, becomes impossible, or by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act becomes impossible
or unlawful.
Illustrations
(b) A and B contract to marry each other. Before the time fixed for
the marriage, A goes mad. The contract
becomes void.
(d) A contracts to take in cargo for B at a foreign port. A’s Government afterwards declares war
against the country in which the port is situated. The contract becomes void when war is declared.
(e) A contracts to act at a theatre for six months in consideration
of a sum paid in advance by B. On
several occasions A is too ill to act.
The contract to act on those occasions becomes void.
Further
effects relating to force majeure is also provided under section 66 of
Contract Act 1950. Section 66 and Illustrations
(a) and (d) of the said section (which are relevant to force majeure)
are as follows:
66. Obligation
of person who has received advantage under void agreement, or contract that
becomes void. When an agreement is
discovered to be void, or when a contract becomes void, any person who has
received any advantage under the agreement or contract is bound to restore it,
or to make compensation for it, to the person from whom he received it.
Illustrations
(a) A pay B RM1,000 in consideration of B’s promising to marry C,
A’s daughter. C is dead at the time of
the promise. The agreement is void, but
B must repay A the RM1,000.
(d) A contracts to sing for B at a concert for RM1,000, which are
paid in advance. A is too ill to sing.
A is not bound to make compensation to B for the loss of the profits
which B would have made if A had been able to sing, but must refund to B the
RM1,000 paid in advance.
As
the provision of sub-section 57(2) and section 66 of Contract Act 1950 is
already clear and being illustrated in the sections respectively the writer
intend not to elaborate it further.
CONCLUSION
Force
majeure clause in the agreement give
major implications to each and every party in the contract as discussed
above. The clause should be construed
and interpreted in strict rule of interpretation in order to extract it true
intention. The effect to the parties
involve is usually in “no one loose” situation, but once it happened, it
is the sad ending to the parties as far as the performance of the contract is
concerned.
References
(a)
Books and Statute
Abrahamson,
M.W. 1979. Engineering Law and the I.C.E. Contracts. 4th.
Edition. Essex: Applied Science Publishers Ltd.
Contract
Act, 1950.
Murdoch,
J. & Hughes, W. 1992. Construction Contracts – Law and Management.
London: E&FN Spon.
Powell-Smith,
V. & Sims, J. 1988. Building Contract Claims. 2nd.
Edition. Oxford: BSP Professional Books.
Saunders,
J.B. (Ed.). 1977. Mozley & Whiteley’s Law Dictionary. 9th.
Edition. London: Butterworth & Co. (Publishers) Ltd.
Simons,
M.S. 1989. Construction Claims and Liability. New Jersey: John Wiley
& Sons, Inc.
Sinnadurai,
V. 1979. The Law of Contract in Malaysia and Singapore – Cases and
Commentary. Kuala Lumpur: Oxford University Press.
Speight,
A. & Stone, G. 1990. Architect’s Legal Handbook – The Law for
Architects. 5th. Edition. London: Heinemann Ltd.
Turner,
D. F. 1987. Building Contracts – A Practical Guide. 4th.
Edition. Essex: Longman Scientific & Technical.
(b)
Courts’ Cases
Berney
v. Tronoh Mines Ltd.
[1949]
M.L.J. 4
C.
Czarnikow Ltd. v. Centralla Handlu Zagranicznego Rolimpex
[1977]
3 W.L.R. 677
Hong
Guan & Co. Ltd. v. R. Jumabhoy & Sons Ltd.
[1970]
M.L.J. 141
Lebeaupin
v. R. Crispin & Co.
[1920]
2 K.B. 714
Matsoukis
v. Priestman & Co.
[1915]
1 K.B. 681
Oakley
v. Portsmouth & Ryde Steam Packet Co.
(1856)
T.I. Exchequer Reports 6 1.F.
Tennants
(Lancashire) Ltd. v. C.S. Wilson & Co. Ltd.
[1917] A.C.. 495