Force Majeure Clauses: What Matters Is Not The Label But The Content Of The Tin!

The Court of Appeal in Classic Maritime Inc. v Limbungan Makmur SDN BHD and Another [2019] EWCA Civ 1102 contrasted the circumstances in which an exceptions clause and a contract frustration clause would operate.

The appeal concerned the charterer's failure to ship five cargos of iron ore from Brazil to Malaysia in the period following the Fundao dam disaster, which had the effect of preventing iron ore cargos from being shipped from Ponta Ubu but not from Tubarao. The court of first instance had found that the charterer did not intend to ship cargo due to a collapse of demand in Malaysia but, had it wanted to, it would have been unable to source alternative cargo from Tubarao.

Distinction between exceptions clauses and Gafta clause 21 ("the Prohibition Clause")

The Court of Appeal compared and contrasted the charterparty exceptions clause with a contract frustration clause, such as the Prohibition Clause. The wording of each clause is set out below:

Exceptions clause

"32. Exceptions

Neither the Vessel, her Master or Owners, nor the Charterers, Shippers or Receivers shall be responsible for loss of or damage to, or failure to supply, load, discharge or deliver the cargo resulting from: Act of God...floods...landslips...accidents at mine or production facility...or any other causes beyond the Owners', Charterers', Shippers' or Receivers' control; always provided that such events directly affect the performance of either party under this Charter Party..."

The Prohibition Clause

"Prohibition

In case of prohibition of export, blockade or hostilities or in case of any executive or legislative act done by or on behalf of the Government of the country of origin or of the territory where the port or ports of shipment named herein is/are situate, preventing fulfilment, this contract or any unfulfilled portion thereof so affected shall be cancelled. In the event of shipment proving impossible during the contract period by reason of any of the causes enumerated herein, sellers shall advise buyers of the reasons therefor. If required, sellers must produce proof to justify their claim for cancellation."

Both clauses share characteristics in that they list a number of events beyond the parties' control (FM events) and define the effect on the contract. The distinction between the two clauses lies in the consequences of the parties' failure to perform their contractual responsibilities. The Prohibition Clause discharges both parties from any obligation to...