Force Majeure: Court Of Appeal Finds Party Was Required To Accept Non-Contractual Performance In Exercising Reasonable Endeavours To "Overcome" Force Majeure Event

• Published date: 08 November 2022
• Law Firm: Herbert Smith Freehills
• Author: Mr Chris Bushell, Susannah Cogman, Rachel Lidgate and Tamsin Rankine-Fourdraine

The Court of Appeal has held, by a majority, that a shipowner was not entitled to rely on a force majeure clause in a shipping contract where its charterer's parent company became subject to US sanctions: MUR Shipping BV v RTI Ltd [2022] EWCA Civ 1406.

The decision turned on the wording of the force majeure clause, which required that the force majeure event could not be 'overcome by reasonable endeavors' on the part of the affected party. The High Court had held that, in exercising reasonable endeavours, the shipowner was not obliged to accept anything other than contractual performance (see our post on that decision).

The Court of Appeal disagreed, finding that the clause required the shipowner to accept a proposal involving payment in an alternative currency, which did not extend to full contractual performance, but which achieved precisely the same result as it: (i) fulfilled the underlying purpose of the relevant obligation; and (ii) caused no detriment to the shipowner. However, it was clear that, had these criteria not been met, the shipowner would have been entitled to rely on the force majeure clause.

The court emphasised that each case will turn on the drafting of the relevant clause as applied to the factual matrix. Parties must therefore be cautious in seeking to rely on previous decisions regarding the interpretation of a force majeure clause.

Background

Our post on the decision of Jacobs J...