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.

 

INTRODUCTION

 

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