Force majeure in English law. Why isn't the clause enough?

In ship building contracts, clause force majeure is essential, but in English law it does not work automatically. The presence of a higher power provision alone is not sufficient for a party to be able to effectively waive liability for delay or default.

The specific wording of the clause, the cause of the event and the behaviour of the party referred to it are decisive. English law requires not only to demonstrate the event itself, but also to prove that it was not attributable to the party's own fault, and that reasonable preventive and restrictive action has been taken.

Force majeure as contractual structure

Development "Force majeure in the ship building agreement. How does the force majeure clause work?"we have started a series of articles on this particular contract design, present in the ship building contracts.

In English law force majeure is not an independent institution of universal law. It is solely the result of the will of the parties expressed in a specific provision of the Agreement. This means that its scope, effects and conditions of application depend primarily on the content of the clause adopted by the parties to the contract.

This has far-reaching practical significance. Unlike many continental law systems, English law does not assume the existence of a general, statutory structure of force majeure. If the parties do not regulate this issue in the contract, they cannot automatically rely on force majeure as a stand-alone basis for immunity from liability.

Force majeure clause and exclusion of liability

English law does not generally treat clauses force majeure as classical exclusion or limitation of liability, as defined as exclusion clauses either limitation pads. This distinction is important because the classical clauses excluding liability are subject to specific interpretation rules in English law.

In case of exclusion clauses The starting point is to assume that a party attempting to free himself from contractual or non-contractual liability should use a clear, unambiguous and unquestionable language. This implies, among other things, the principle vs., according to which the ambiguity of interpretation is decided against the party citing the exemption in question.

Historically, English courts have taken careful steps to limit or eliminate contractual liability. This was due to the belief that the parties should not be easily deprived of their legal protection.

Clause force majeure However, it has a different function. Its objective is not to simply exempt the party from liability for its own breach of contract, but to determine the contractual effects of exceptional events outside reasonable control of the parties. In practice, it is therefore an indication of when certain contractual obligations may be temporarily suspended, extended or terminated due to events provided for in the contract.

Contract risk sharing mechanism

For this reason, the English courts increasingly treat clauses force majeure as a stand-alone contractual risk sharing mechanism. The Parties shall not so much exclude responsibility for their own actions, but shall determine in advance the legal effects of certain exceptional circumstances.

The consequence of this approach is the education of separate interpretative rules appropriate to clauses force majeure. The Court of First Instance examines in particular the specific wording of the provision, the type of event covered by the clause, the causal link between the event and the failure to fulfil the obligation and the behaviour of the party which invokes a force majeure.

This does not mean a complete break with the acquis on classical clauses excluding liability. In cases like The Super Servant Two [1990] 1 Lloyd’s Rep. 1 English courts assisted in referring to the principles developed against the background exclusion clauses. But they did so not because force majeure clauses are identical with them, but because both types of provisions relate to the distribution of contractual risks between the parties.

Your own wine disables protection

One of the most important rules remains the rule that a party may not rely on a force majeure if the event preventing or obstructing the performance of the contract is due to its own fault, omission or breach of contractual obligations.

In other words, an event under the control of a party or resulting from its own fault cannot be considered a case force majeure.

The classic expression of this principle is in precedent Lebeaupin v Richard Crispin & Co. [1920] 2 K.B. 714. Judge McCardie referred there to the established principle of English law: "No man may take advantage of his own crow", that is, "No one can profit from his own unlawful action."

On this basis, a rule relating directly to clauses was formulated force majeure: "A man cannot rely upon his own act or negligence or omission or default as force majeure", i.e.: "No one may invoke as a force superior to his own action, negligence, omission or failure to perform his duty".

The importance of this principle is fundamental. If an event remains even partially the result of the behaviour of the party claiming force majeure, the English courts generally deny its protection under this clause. Force majeure is intended to protect against external and party-independent events and not from the consequences of own organisational errors, negligence or breach of contract.

The exception requires clear words

However, this principle is not absolutely absolute. Because force majeure is a purely contractual structure, the parties retain wide freedom in shaping its scope. If, in a sufficiently clear and unambiguous manner, they decide that certain cases of fault are also to be protected for force majeure, the court may accept such a provision.

This approach can be confirmed on E.E. Caledonia Ltd v Orbit Valve Co Europe Ltd [1993] 2 Lloyd’s Rep. 418. Judge Hobhouse there pointed out that it should not be assumed that the parties to the agreement intended to exempt either of them from the effects of their own negligence unless such an intention was expressed using clear and explicit words.

The starting point therefore remains unchanged: the party's own negligence is not covered by the clause force majeure. If the parties want to leave this principle, they must do so in a completely unambiguous way.

A similar direction of reasoning had appeared earlier in the case Sonata Offshore S.A. v Amerada Hess Development Ltd and Another [1988] 1 Lloyd’s Rep. 145. Also there, the court allowed the possibility of contractual extension of the scope of the clause force majeure, but at the same time stressed the importance of precise drafting of contractual provisions.

The Super Servant Two and the Limits of Force majeure

The most famous precedent for this issue remains I. Lauritzen A/S v Wijsmuller B.V. (The Super Servent Two) [1990] 1 Lloyd’s Rep. 1.

The actual situation of the case was particularly relevant to contractual practice. The shipowner had two ships capable of carrying out a specific transport contract. One of them sank while the other was directed to another commercial employment. As a result, the shipowner has lost its ability to carry out the previously concluded contract.

He then tried to invoke the clause force majeure, which included, inter alia, force majeure, random events, marine hazards and other circumstances which could reasonably impede, prevent or delay performance of the contract.

The problem was that the shipowner himself contributed to a situation preventing the performance of the contract. He referred the second available unit to another commercial venture. The Court of Appeal refused to grant such a situation protection under the clause force majeure.

Lord Bingham indicated that the force majeure clause had a limited scope and did not extend to the circumstances for which the carrier or its employees were responsible. In practice, the principle that force majeure does not serve to protect against the effects of its own commercial decisions if they lead to a default.

Modern approach by English courts

Not all subsequent rulings developed this line in an equally rigorous way. In cases Transocean Drilling UK Ltd v Providence Resources Plc [2014] EWHC 4260 (Comm) and Persimmon Homes Ltd v Ove Arup & Partners Ltd[2017] EWCA Civ 373 has developed a more liberal approach to the interpretation of contract clauses, including provisions on exclusion or limitation of liability.

The essence of this trend is to depart from the mechanical application of the principle vs. and from the assumption that any clause limiting or modifying the liability of one party should be interpreted as narrow as possible.

The courts began to stress more strongly that in contracts concluded between professional trading participants, negotiated with lawyers and involving a complex risk sharing, the starting point should be a simple, objective linguistic and commercial interpretation.

On Transocean Drilling UK Ltd v Providence Resources Plc The dispute concerned offshore driving contracts and the scope of the provisions excluding liability for certain categories of loss. The court pointed out that in modern offshore contracts the parties often consciously and in detail share risks among themselves. In such circumstances, it should not be assumed in advance that a liability limitation clause is an exception requiring a particularly restrictive interpretation.

A similar approach has been highlighted on the Persimmon Homes Ltd v Ove Arup & Partners Ltd. Court of Appeal stressed that the rule vs. is currently of limited importance, especially in contracts concluded between professional entities with comparable negotiating power.

The relevance of these judgments to clauses force majeure is that they show the general direction of modern English law. The natural importance of words, the commercial context of the contract and the sharing of risks agreed by the parties are increasing.

However, this does not mean that Transocean and Persimmon Homes repeal the principle resulting from Lebeaupin and The Super Servant Two. The starting point remains the assumption that the party cannot rely on a force majeure due to the consequences of its own actions, negligence or breach of the contract. Newer rulings only show that if the parties have used a sufficiently clear language, the English court can respect the risk-sharing they accept instead of automatically reaching for narrower interpretation rules.

Two principles in contract practice

In practice, this means maintaining two parallel principles.

First, clause force majeure it will not in principle protect the parties from the consequences of its own fault, unless this is very clear from the content of the agreement.

Secondly, if professional parties have clearly and consciously expanded the scope of the clause, the English court may now be more inclined to respect such a solution than to automatically restrict it by means of traditional rules of interpretation for clauses excluding liability.

Despite these changes, the dominant direction of the case-law remains in line with the line set by The Super Servant Two. It can be summarised as follows: actions, negligence or breach of obligations will in principle be interpreted as falling outside the scope of the force majeure clause.

If the parties want to deviate from this principle, they must use an extremely precise language. The more they intend to expand protection force majeure for events arising from own actions or negligence, the greater the clarity of the contractual provisions.

NEWBUILDCON and ship construction contracts

A good example of practical solution is clause 34(iii)(1) of the NEWBUILDCON form. It provides explicitly that a particular event cannot be considered a case force majeureif it has been caused by a mistake, negligence, act or omission of the yard or its subcontractors.

In such circumstances, the parties themselves confirm contractually the principle resulting from The Super Servant Two. They thus eliminate a large part of potential interpretational doubts.

This is important for shipbuilding contracts. Ship construction is a multi-stage process involving the yard, subcontractors, equipment suppliers, classifier and contracting authority. Delay can be due to many reasons, but not all of them can be effectively qualified as force majeure.

If the obstacle is due to an organisational error, negligence of the shipyards, inappropriate supervision of subcontractors or problems that could reasonably be addressed, it will be difficult to rely on a higher power to defend.

Obligation to prevent the effects of an incident

Another fundamental principle is the obligation to demonstrate that the party citing force majeure has taken all reasonably anticipated measures to prevent or avoid adverse effects on the performance of the contract.

The mere fact of the occurrence of an event in the literal directory of cases of force majeure is not sufficient. The party citing the protection resulting from the clause must further demonstrate that the event was indeed unavoidable despite its appropriate action Preventive.

This approach stems from the very essence of English construction force majeure. This clause is not an automatic liability release mechanism. It is intended to protect only against the effects of events which the party could not reasonably prevent.

Where certain organisational, technical or commercial activities may have prevented or limited the effect on the performance of the contract, the absence of such actions may exclude the possibility of effective recourse to a higher power.

This principle was formulated by Lord Griffiths in the case B&S Contracts and Design Ltd v Victor Green Publications Ltd [1984]. It pointed out that such clauses should be interpreted on the understanding that the citing party had taken all reasonable measures to avoid the effects of the events mentioned in the clause.

In practice, therefore, the court is not limited to determining whether an event has actually occurred. Equally important is the question of whether the party could reasonably have prevented or reduced its effect on the performance of the contract.

Strikes are not always enough

This principle has been developed in the case Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep. 323. The contract contained a clause force majeure including, inter alia, strikes, lockouts and other events outside the control of the party concerned.

Sealink referred to this clause after performance of the contract was disrupted by the strike of his own crew. At first glance, the company's argument may have seemed convincing, as the strike was explicitly mentioned in the clause.

However, the Court of First Instance refused to grant protection resulting from force majeure. He felt that Sealink had not shown that all reasonably available measures could have led to a strike being avoided or to a reduction in its effects.

The Court of Appeal divided this position. Lord Ralph Gibson LJ explained that the requesting party had to demonstrate that there were no reasonable steps that she could take to avoid a situation preventing the performance of the obligation as a result of an incident covered by the clause.

The relevance of this ruling to shipbuilding contracts is specific. It shows that even an event listed directly in the case directory force majeure does not automatically activate the protection provided for in the contract. It is necessary to demonstrate that the party did not have a real opportunity to prevent this event, or Limiting its effects.

Minimisation of force majeure effects

The obligation to minimise the effects of an incident is closely linked to the obligation to prevent action force majeure. While the first rule concerns the preservation of the party against the occurrence of an obstacle, the second applies to actions taken after it has occurred.

English law assumes that even after the occurrence of an event qualified as force majeure the page cannot remain passive. It should actively take action to limit the adverse consequences of the event for the performance of the contract.

So it is not enough to show that the obstacle has actually occurred. It is also necessary to prove that reasonable action has been taken to restore the performance of the contract or to limit the delay.

This principle has been confirmed, inter alia, in the case Provimi Hellas AE v Warinco AG [1978] 1 Lloyd’s Rep. 373. Today, this obligation is often entered directly into contracts. An example is the NEWBUILDCON form, the clause 34(a)(iii)(4) of which provides that the yard should take all reasonable measures to avoid and minimise the effects of such events.

In practice, ship construction contracts mean that the shipyard citing force majeure may not be limited to demonstrating the event itself. It must also prove that it has taken preventive action before its occurrence and that it has taken action to limit its effects after its occurrence.

Only the cumulative fulfilment of these conditions allows effective use of the protection provided for by the force majeure clause.

Importance of ship construction contracts

Modern English Law Treats force majeure not as passive release from liability, but as a protective mechanism available to the party that acted actively, carefully and rationally both before and after the occurrence of the event.

From the perspective of shipbuilding contracts, this is essential. Clauses force majeure, including the provisions of the NEWBUILDCON form, should be edited with the utmost precision. This applies in particular to situations where parties wish to cover their border events, subcontractor activities, supplier delays, organisational errors or the consequences of their own negligence.

Lack of precision will in principle act against the party citing a clause. The English court may then assume that force majeure protect only against events that are genuinely external, independent and unavoidable despite reasonable remedial action.

As a result, effective recourse to a higher force requires three elements: an appropriate event, a properly constructed clause and a documented response of the affected party.

The clause alone is not enough

English construction force majeure In the ship building agreement, it remains primarily a contract institution and not a standalone universal law institution. The specific wording of the clause adopted by the parties determines its scope, effects and conditions of application.

However, this does not mean full freedom. The English jurisprudence has developed a number of rules limiting the possibility of relying on a higher power, especially when the event is due to its own action, omission, negligence or breach of obligations by the party referring to this clause.

The principle expressed in Lebeaupin v Richard Crispin & Co. and confirmed in The Super Servant Two: Party cannot benefit from protection force majeure with regard to the effects of self-inflicted conduct.

However, since the force majeure in English law is purely contractual, the parties may modify this principle. However, they must do so using a clear and precise contractual language. Lack of such precision will usually lead to narrowing Interpretation of the clause.

Active action is equally important. It is not sufficient to demonstrate that an event is listed in a clause or objectively impedes the performance of the contract. The Party must further demonstrate that it has taken all reasonable preventive action and, following the obstacle, sought to limit its effects.

In this sense English law does not treat force majeure As a simple discharge from responsibility. This is a safeguard mechanism only available to the party acting carefully, rationally and economically justified.

Marek Czernis – a lawyer specialising in maritime law and shipbuilding contracts, for years dealing with issues related to the construction of ships, shipping and contract liability in the shipbuilding industry. It advises shipowners and maritime industry, combining legal practice with an in-depth knowledge of the reality of the shipbuilding market.