Force Majeure And Frustration

• Published date: 28 October 2020
• Subject Matter: Corporate/Commercial Law, Coronavirus (COVID-19), Contracts and Commercial Law, Litigation, Contracts and Force Majeure
• Law Firm: Reed Smith (Worldwide)
• Author: Ms Lisa Meller and Sophie Davis

Welcome to our new series of 'back to basics' blogs in which we will provide blogs focused on common legal issues. This blog post will address force majeure and frustration, two concepts which charterers have regularly relied on since the presence of COVID-19, often with varying degrees of success.

General Rule

English law generally holds parties who have contracted to do something accountable even where subsequent events make performance challenging or expensive. Nevertheless, two exceptions can often be invoked, frustration and force majeure. It is important to note that under English law force majeure only applies if there is a specific clause within a contract that provides for it, while frustration is a common law doctrine. There has been renewed interest on force majeure, in particular, because of the COVID-19 pandemic.

Force Majeure

Force majeure clauses can vary, however the three general requirements that must be met are:

1. There must be an occurrence of an event specified in the clause. The events giving rise to force majeure are often extraordinary events which are listed in the force majeure clause and which must usually be outside either party's control. An example of a case where it was discussed what "outside either party's control" means is Lebeaupin v Crispin [1920] 2 KB 714. At para. 719 it was held that force majeure events were "circumstances independent of the will of man, and which it is not in his power to control". Typical examples of force majeure events are wars, strikes, earthquakes and other extreme weather. However, due to the fact, there is no general principle of force majeure in English law, if a contract refers only to a "force majeure event" then it will be a matter of contractual interpretation to determine what this means in the circumstances.
2. That the events have "prevented" "hindered" or "delayed" the party from performing under the contract (see Tennants (Lancashire) Ltd v G.S Wilson & Co. Ltd [1917] AC 495 where the delivery of chemicals was prevented by the First World War). The actual wording used must be carefully analyzed.
3. That no reasonable steps are possible to avoid the events or the consequences. In Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd's Rep. 323 the Defendant failed to make two named vessels available for a bareboat charter. The court held that they had failed to search for and tender alternative vessels, which prevented them from relying on the force majeure clause. A more recent example is Seadrill Ghana Operations Ltd v Tullow Ghana Ltd (2018) where the court stated that when considering reasonable steps to mitigate, a party should consider the interests of both contracting parties and not just its own.

Practical Considerations

The following should be considered in relation to invoking a force...