BIMCO Force Majeure Clause 2022 (download)

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Force Majeure

(www.MaritimeCyprus.com) The concept of force majeure dates back to the beginning of the Roman Empire. Nowadays this concept has spread and many countries have incorporated it into their legislation. Examples of such countries are France, Germany, Spain, Brazil and China.

There is a general understanding that by simply claiming an extraordinary event as force majeure a party is automatically discharged from any contractual duties. This assumption is often incorrect and thorough attention must be paid before invoking force majeure. This article is intended to draw attention to the definition of force majeure and its application, and to give general guidance which may assist a contracting party when faced with a possible force majeure event.

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:

  1. Externality - the circumstances that lead to the non-performance of the obligation were beyond the control of the parties;
  2. 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.
  3. 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:

(i) reserve its rights

(ii) 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.

English Law – brief considerations

Under English law, force majeure is not a term of art, in the sense that it is not a freestanding legal concept which exists outside the terms of the contract. For force majeure to be of relevance, there must be either (i) a reference in the contract to force majeure, or (ii) a “force majeure” clause in the contract.

In the case of the former – for instance, if there is a reference to “force majeure excepted” – what constitutes force majeure has been decided largely on a case-by-case basis. It includes “Act of God”, but may also encompass not only natural events (e.g. floods, earthquake) but also events created by human intervention (e.g. strikes, wars, embargos). In the case of the latter – a specific force majeure clause – the parties to a contract will specifically define particular events and what is to happen when those events occur. In effect, this is an exception clause, and it makes no difference whether it is headed “force majeure” or not.

Such clauses are drafted in a variety of ways and it is not uncommon to come across clauses stating a number of events and finishing with “or any other causes beyond our control”. The reference to “other causes” will generally be given its natural, wide meaning and is unlikely to be limited to events ejusdem generis with those previously listed in the clause.

As to the burden of proof under English law, it is for the party relying on the force majeure provision to prove the occurrence of one of the events listed, that his performance has been adversely affected by that event, that his non-performance was beyond his control and there were no reasonable steps he could have taken to avoid either the event or its consequences. If the force majeure provision requires for instance that notice of force majeure be given, complying with such notice requirements is of the utmost importance.

force majeure

BIMCO Force Majeure Clause 2022

The unforeseen events of recent years have demonstrated how beneficial it can be for parties to contractually “expect the unexpected” – whether the event is extraordinary weather conditions caused by climate change or a pandemic. To help parties prepare for the unexpected, BIMCO has published a new clause.

The new BIMCO Force Majeure Clause 2022 provides a comprehensive “code” for the parties to help resolve situations arising from unexpected events impacting the performance of the contracts. It is a “model” clause designed for use with all types of agreements. This means that parties may need to adapt it to suit the specific needs of their contract and should look carefully at the wording and the explanatory notes before using the clause.

The Clause was drafted by a team of industry experts to which BIMCO is grateful: Inga Frøysa, Klaveness, who led the drafting team, with the assistance of Nicola Ioannou, Oceanfleet; Peri Ertugruloglu, Viterra; Rory Butler, HFW; Andrew Rigden Green, Stephenson Harwood; and Philip Stephenson, The Standard Club.

You can download below the Force Majeure Clause and accompanying explanatory notes:

 

Source: BIMCO

 

 

From more Guidance papers from BIMCO click HERE

 

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