The Importance Of Force Majeure: Key Points

• Published date: 27 January 2023
• Subject Matter: Government, Public Sector, Coronavirus (COVID-19), Government Contracts, Procurement & PPP, Litigation, Contracts and Force Majeure
• Law Firm: Kevin Wu & Associates
• Author: Charumathy Nair and Kevin Wu

What is Force Majeure?

The term 'Force Majeure' has been defined in Black's Law Dictionary, as 'an event or effect that can be neither anticipated nor controlled'. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.

Under the Malaysian contract law, there is no definition of "Force Majeure"; at the same time, there is no regulation in Malaysian law that prohibits parties from providing for Force Majeure events, namely, that certain external events may have the effect of ceasing contractual performance or releasing the parties from their responsibilities under a contract.

A Force Majeure clause must be stated in the contract

It is a prevalent understanding that when a contract is put in writing, the intention of the parties must be found within the four corners of the contract itself. Thus, the Force Majeure clause can only be used and relied on when it is clearly stated in the contract. This is affirmed in the Court of Appeal case of BIG Industrial Gas Sdn Bhd v Pan Wijaya Property Sdn Bhd and Another Appeal [2018] 3 MLJ 326¹.

The notion above was also upheld in the High Court case of Gogung Fusion Restaurant (KLCC) Sdn Bhd & Ors v Suria KLCC Sdn Bhd [2021] MLJU 2345² which explains the force majeure law as follows:-

"It is trite law that for a party to rely on an alleged Force Majeure event, the said event must be specifically provided in the contract and is not implied by law..."

Events capable of constituting Force Majeure

The events to invoke Force Majeure must be unforeseeable which would inevitably affect or prevent the parties' ability to perform their obligations under a contract. In short, the events that have transpired must be beyond their control.

As an example, in Malaysia, if we were to peruse the COVID-19 pandemic (COVID-19) and the Movement Control Order (MCO) that lasted from 18.3.2022 to 1.11.2021, many contractual provisions set forth a specific list of Force Majeure events which are considered to be events beyond the control of the parties, such as "pandemics", "epidemics" or "diseases."

Note: A specific reference to a "pandemic" will make it easier to bring a Force Majeure claim but at times you might still be required to provide other criteria for a Force Majeure test to be fulfilled.

If a particular provision does not express language to the effect stated above, then it will be...