BIMCO has released the new Force Majeure Clause 2022.
Definition
Force majeure as a civil law concept is designed to excuse one or all of the parties from liabilities and or obligations under a contract. It arises where there has been an occurrence of extraordinary events, specified events or events beyond the parties’ control.
In a civil law system which emphasizes the use of legislature, force majeure operates as a matter of law. The definition and application are referred to in statutes and are implied into any civil law contract. Parties to a contract may exercise their rights of freedom of contract to expand the definition of force majeure and widen its application in that contract. It is important, therefore, always to refer to the relevant contract before making general assumptions. Examples of force majeure events are wars, strikes, earthquakes, extreme heavy rains/winds.
Effects
Force majeure operates by relieving a party partially or fully from his obligation to perform a particular obligation. It can also suspend the execution of an obligation or allow an extension of time to perform the same. It is not intended to excuse negligence or wilful default.
Elements
In order for the force majeure effects to operate it is necessary to fulfil certain conditions which are commonly referred to as the three tests:
- Externality – the circumstances that lead to the non-performance of the obligation were beyond the control of the parties;
- Unpredictability – the party must not be able to anticipate the occurrence of the event. If an event is foreseeable, a party must be prepared for it.
- Irresistibility – the consequences of the event could not be avoided.
Burden of proof
The burden of proof rests on the party wishing to be discharged from his contractual obligation(s). The party must prove that the facts fall within the legal definition of force majeure and comply with the three tests.
As mentioned above (in “Effects”), contracting parties may often modify the application of force majeure by imposing additional requirements. Contracts can require that a party must give notice before invoking force majeure. This is intended to give the other party chance to:
- reserve its rights
- try to mitigate or reduce the probable losses.
In addition, contracts can also have provisions that require the invoking party to try to mitigate the effects on the other party. This may be achieved by taking reasonable steps to prevent the loss or limit it.
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Source: BIMCO
