Force Majeure

Force Majeure

Force Majeure is a common clause in charterparties and essentially frees both parties from liability or obligation when an extraordinary event or circumstances beyond the control of the parties such as war, invasion, act of foreign enemies, rebellion, revolution, blockage, embargo, strike, riot, crime, act of God, such as flooding, earthquake, volcano, prevents one or both parties from fulfilling their obligations under the contract.

In Force Majeure, neither party can have any part in the event. Force Majeure must be unexpected, and the consequences of the event must have been unavoidable.

It has been argued that in certain areas of the world where seismic activity occurs, such as California or Japan experiencing earthquakes, then they are not unexpected, however, here the test will move to the consequences of the event, for instance we might ask was it a severe earthquake which caused serious disruption and damage? An example of illegality to load a cargo could be where a government has changed and the new administration introduces a law prohibiting the export of single a given commodity.

Although the case law cited in the text books goes back to 1878 there are more recent examples. For example, the banning of grain exports from a South American country with a view to stabilising prices for domestic consumers and another where coal exports from China were limited to a certain maximum level to reduce the reliance on high cost imports in a time of unprecedented demand for coal from local power and manufacturing industries.

If the illegality exists at the time the contract was made but there was a reasonable expectation that the legal prohibition would be lifted by the expected loading time the result may well be that the charter is frustrated.

The risk under these circumstances is that it will be concluded that the charterer has taken the risk that the prohibition will be relaxed and will be liable, if the prohibition remains in force, for failure to ship.