Nowadays this concept has spread and many countries have incorporated it into their legislation. There is a general understanding that by simply claiming an extraordinary event as force majeure a party is automatically discharged from any contractual duties. This assumption is often incorrect and thorough attention must be paid before invoking force majeure. This article is intended to draw attention to the definition of force majeure and its application2, and to give general guidance which may assist a contracting party when faced with a possible force majeure event.
What is force majeure? Certain events, beyond the control of the parties, may inhibit the parties from fulfilling their duties and obligations under the project agreements. To avoid the resultant breach of contract, parties may prefer to excuse contractual obligations to the extent that they have been so inhibited.
Different legal systems have developed different theories in response to this need, including the doctrines of impossibility and frustration in England and the United States and force majeure in France.
Under French law force majeure is an event that is unforeseeable, unavoidable and external that makes execution impossible.
Generally, force majeure means what the contract says it means. Are force majeure clauses standardized? Force majeure is often treated as a standard clause that cannot be changed.
However, as the clause excuses a party from carrying out its obligations, it needs to be carefully thought through and tailored for the project in question. It may be appropriate for there to be different events that give rise to different contractual consequences. It is important to note that Lenders do not like force majeure as it creates a level of uncertainty for them.
Therefore, where external funding is to be called upon, thought should be given when drafting the underlying project agreements as to what Lenders are likely to accept.
Checklist of issues to consider re. Force Majeure Who should bear risk? The risk of force majeure is generally allocated to the grantor.
However, in certain markets, such as the UK, the grantor may require the project company to bear a portion, or all, of the force majeure risk or may separate the risks between natural and political force majeure events, with different consequences see below.
What are the consequences of force majeure event? Should the affected party be relieved of its obligations to perform under the contract?
In some projects a force majeure event is likely to have an impact on the whole project — such as lightning striking a power plant transmission substation and making it temporarily unusable. However, in other projects, such as a water concession over a whole network, even if force majeure has an impact on a specific treatment plant or pumping station, it may not affect the whole network.
The affected party should be under an express duty to minimize the disruption caused by force majeure.
Care should be taken to ensure that force majeure events only relieve obligations to the extent that they prevent the party from performing them. Liquidated damages Is the contractor to pay liquidated damages if completion or some other event does not occur by a specified date?
If so, the contract should stipulate that the date in question is extended by any period during which the contractor is prevented from carrying out the activity in question.
To what extent if any should the contractor continue to be paid even where it is unable to perform its obligations. This should be expressly stated. Other project documents Is there a linked project agreement that may be affected also? For example, if a project company is to receive no revenues during a force majeure event under a power purchase agreement, will it still be liable under the take or pay provisions in the fuel supply contract?
Lenders will want to ensure that the definition and treatment of force majeure is identical in each of the project contracts. However, it should be remembered that force majeure only excuses a party from performing under a contract to the extent that performance under that contract is hindered or prevented.
Therefore, it may be necessary to include a provision specifically referring to circumstances where a party is prevented from performing its obligations under another agreement due to force majeure.
Should a maximum period be identified during which the effects of one single event or an aggregate duration of force majeure events over the period of the concession may last before one or both of the parties can act to either remove itself from the project or obtain compensation for damages incurred.
NB — watch out for wording which talks about continuation of the force majeure event for a period — what is important is the duration of the inhibiting effects of force majeure. The theory is that parties will have insurance and other resources to tide them over for some period of force majeure, but eventually they should be entitled to terminate.
The definition of "force majeure" generally includes "risks beyond the reasonable control of a party, incurred not as a product or result of the negligence of the afflicted party, which have a materially adverse effect on the ability of such party to perform its obligations".
Sometimes an even stricter requirement, requiring impossibility of fulfilment, is imposed.
This is a very difficult fact to prove and could result in the operator bearing an unacceptable level of risk. Therefore, where supply of electricity is necessary for the operation of the facilities but is generally intermittent, then the parties should ensure that there is standby generation or some other solution.
Force majeure events The parties will usually agree on a list, which may or may not be exhaustive, of examples of force majeure events. Force majeure events generally can be divided into two basic groups: These are events which are not within the control of the Host Government.
|Restitution The question still remains as to whether any contractual pre-payments are to be repaid in the event of frustration.|
|In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer software and hardware services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances. If either party fails to fulfill its obligations hereunder other than an obligation for the payment of moneywhen such failure is due to an act of God, or other circumstances beyond its reasonable control, including but not limited to fire, flood, civil commotion, riot, war declared and undeclaredrevolution, or embargoes, then said failure shall be excused for the duration of such event and for such a time thereafter as is reasonable to enable the parties to resume performance under this Agreement, provided however, that in no event shall such time extend for a period of more than one hundred eighty days.|
|Effect of Force Majeure Sample Clauses||A drought has been officially declared over all of the North Island, and parts of the South Island. Force majeure events are generally understood to include acts of God, nature, war or government.|
The parties will need to look at the availability and cost of insurance, the likelihood of the occurrence of such events and any mitigation measures which can be undertaken.prevent Force Majeure Events affecting the performance of the Company's obligations under this Agreement; mitigate the effect of any Force Majeure Event; and.
comply with its obligations under this Agreement. The Parties shall consult together in relation to the above matters following the occurrence of a Force Majeure Event.
An act of God may amount to an exception to liability in contracts (as under the Hague–Visby Rules); or it may be an "insured peril" in an insurance policy. By contrast, other extraordinary man-made or political events are deemed force majeure. It should be noted that many theories on this issue have been established in different states under the clause of frustration, force majeure, impossibility, Act of God and failure of presumed conditions.
Effect of Force Majeure. If either party is rendered unable by force majeure to perform or comply fully or in part with any obligation or condition of the Agreement (other than the payment of money), the affected party must give written notice to the other party of such force majeure event (a Force Majeure Notice) within 48 hours after receiving notice of the occurrence of the force majeure event relied upon.
Delay and Force Majeure Events: Trends in Ohio Caselaw. In Ohio, in order to use a force majeure clause as an excuse for nonperformance, the nonperforming party "bears the burden of proving that the event was beyond their control and without its fault or negligence." Stand Energy Corp.
v. Cinergy Services, Inc. (), N.E.2d Melting snow, sizable amounts of rainfall, and saturated . If upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided for in Article of the Civil Code, which results in loss or damage, the obligor cannot escape liability.