Frank G.

Adams, PE President
Christopher J. Sullivan Vice President Operations
Interface Consulting International, Inc.

FRANK G. ADAMS, PE
o

Over 40 years of engineering

and construction experience on
projects in over 50 countries
Arbitrator on construction,
engineering, and intellectual
property disputes
Speaker and educator in
construction management and
claims preparation and
analysis

CHRISTOPHER J. SULLIVAN
o

Over 25 years of engineering,

procurement, and construction
experience
Worked in the US and across
Europe, South America, Africa,
the Middle East, and Pacific
Rim countries

Numerous publications and

speaking engagements

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Force Majeure Defined

Force Majeure Clauses
Force Majeure Impacts
Force Majeure Implications
Force Majeure Dispute Resolution
Force Majeure in Energy Contracts
Force Majeure Risk Mitigation
Force Majeure in Troubled Times

Blacks Law Dictionary defines force majeure as an

event or effect that can neither be anticipated nor
controlled. The term includes both acts of nature
and acts of people.
A contract doctrine that is usually applied as a
defense to breach of contract or nonperformance
claims that relieves a party from ongoing
performance obligations due events that could not
be anticipated and/or are beyond their control.

Under most national laws, force majeure events must meet

four criteria:
1.

The event must be external to the contract and the parties;

2.

the event must render the partys performance radically

different from what the parties originally contemplated;

3.

the event must have been unforeseeable; and

4.

the occurrence of the event must be beyond the control of

the party seeking to use force majeure as an excuse for nonperformance.

Force majeure means whatever the contract says it

means.
Always look to the contract first to see if a specific
event is covered.

TYPICALLY, FORCE MAJEURE IS:

o
o

War, terrorism, strikes, riots, crimes, etc.

Acts of God
Including hurricanes, named storms, flooding,
earthquakes, volcanos, etc.

o
o

Inability to obtain resources due to loss of goods

in transit, force majeure event, shortages, etc.
New laws, regulations, or embargos
Whatever the contract says it is

FORCE MAJEURE IS NOT:

o

If a contract defines force majeure events, then an event not

specified in the clause may not excuse nonperformance.
If the contract defines force majeure as a flood or
hurricane, then unusually high winds or heavy rain may not
excuse nonperformance.
A phrase such as including without limitation included in
the clause can mitigate the risk of lack of definition.

Contractual force majeure clauses routinely enumerate a

list of extraordinary events that parties consider to be
beyond their control.
Should be defined clearly in order to get a true scope of
coverage.
All parties should know the precise definition, scope of its
usage, and limitation of the clause.

Force majeure clauses have four key components:

1. A description of events that can trigger a force majeure
condition.
2. Terms that define the duration of that condition.

3. A notice provision describing how a declaration of force

majeure is to be communicated.
4. A description of the effects that a force majeure event
will have on contractual obligations of the parties.

The contracting parties shall for a certain period of time be totally or 2

partially excused from their obligations to perform under this
Agreement in cases of force majeure by reference herein if such
breach or failure to perform is due to acts beyond the reasonable
control of such party, which include by way of illustration, acts of
God or public enemy, acts of Federal, state or local government,
either in its sovereign or contractual capacity, fire, floods, civil
disobedience, strikes, lock-outs, freight embargoes, inclement
weather, or any other cause or conditions beyond such partys
reasonable control; provided, however, that the party which has
been so affected will (i) promptly give written notice to the other of 3
the fact that it is unable to so perform and the cause(s) therefore;
and (ii) resume its performance under this Agreement immediately
upon the cessation of such cause(s).

Force majeure clauses often contain catchall phrases such

as or any other cause or conditions beyond such partys
reasonable control.
The catchall phrase must be construed within the context
established by the list of force majeure events that precedes
it.
The phrase is typically limited to events similar to those
specifically listed.

While a force majeure event, such as a hurricane, may

directly damage the project site, it may also cause other
indirect damages, such as:
Work Scope
Costs to repair damage
Cost to finish original project
Material shortages
Labor shortages
Increase material prices
Increase labor prices
Supply obligations
Schedule Deadlines

What work was delayed and/or disrupted?

Was unfinished or finished work damaged?

Were material or equipment shipments delayed

and/or disrupted?
Was there an impact to labor
Was the labor pool reduced?
Was the labor poor unable to reside there?

Some owners allow price increases for changes in the scope

of work caused by force majeure events.
This is based on the premise that they would like the
contractor to bid solely on the work described.
Traditional contract matters usually require a change order
to address the effect of force majeure.
Many owners do not allow price increases for force majeure
generated changes and limit contractor relief to schedule
time extensions.

A time extension is of limited help to contractors facing increases

in labor, material, and other expenses, such as fuel, worker
housing, temporary facilities, etc.
Time extensions will not cover the costs of materials or labor
that increase drastically as a result of a force majeure event.
The party responsible for supplying materials and labor could
include a separate escalation clause in its contract to absorb
increases to material or labor costs.
Escalation is difficult to estimate until after the force majeure
event.

Escalation clauses can reference a general inflation index or

a specific materials/industry index to be adjusted for
severity of a force majeure event.
Although severe weather can impact materials prices, a
force majeure clause is not intended to protect a party
against the normal risks of delay and disruption.
The typical risk of a fixed-price contract is that the price to
perform the contract work scope will increase without the
owner granting the contractor relief.

The party affected by force majeure is not in breach of the

contract.
Force majeure only suspends a partys performance and
obligations for the duration of the force majeure.
The contractor is typically entitled to the extension of time,
and sometimes compensation, for the delay depending on
the wording of the contract clause.

Force majeure may be declared for a partys what longerterm consequences might flow from its decision to declare
force majeure.
Can lead to disputes with a party to the contract that
opposes the existence of the force majeure event.
Remember, the clause may be declared by any parties to
the contract.

A declaration of force majeure is sometimes made for the

partys strategic benefit.
A contractor or owner may obtain a beneficial time
extension by declaring force majeure and extending the
period available to meet its commitments.

There is as widespread lack of clarity in the formulation of

the clause, which can impair dispute resolution.
Disputes usually stem from different interpretations of the
contract, improper terms being used in the contract clause,
and certain omissions in the contract clause.
Disputes also typically pertain to the duration of the force
majeure event and liability issues for repair or replacement
of finished or unfinished work.

Declaring force majeure protects the party from breach of

contract claims only if the force majeure clause was
adhered to and the event is listed in the clause.
The most disputed issue of force majeure is the threshold
issue of which events fit within its definition and excuse
performance.
Parties frequently write into the contract the remedies
available upon occurrence of force majeure events.

Negligence and fault should be defined separately in the

contract to avoid being regarded as a force majeure event.
The party seeking relief under the force majeure clause
must show it exercised reasonable diligence to avoid the
event.
If another company affected by the same disruption has
found an alternative way to fulfill its commitments that
method could become the benchmark for establishing
what should have been done to avoid or mitigate the event

A force majeure clause may permit an extension of the

completion date, but prohibit a contractor from claiming
damages resulting from delay.
However, parties are free to contract otherwise.

An energy contract may include provisions aimed at

ensuring performance in case of force majeure.
Some long-term oil and gas supply contracts provide for
the restoration of quantities in force majeure clauses.
For example, an alternative obligation clause may provide
for replacement pipeline gas in place of LNG delivery.

Energy contracts are unique in that there can be multiple

buyers and sellers of products.
Also differ from typical construction contracts in that there
may not be construction involved at all often involves
transporting, refining, and selling goods.

For example, a force majeure clause in a contract for the

sale of liquefied natural gas (LNG) the seller(s) and the
buyer(s) can include the standard language of force
majeure and add potential accidents related to the
production and transport of natural gas.

Typical contract language may start off saying:

The contracting parties shall for a certain period of time be totally or
partially excused from their obligations in cases of force majeure,
such as, in particular: fire, flood, atmospheric disturbances,
storm, tornado, earthquake, washing away of soil, landslide,
lightning, epidemic, war, riots, civil war, insurrection, actions of
public enemies, government action, strikes, lockout, with the
burden upon the party relying upon it to supply proof of the force
majeure nature of such event; and in the following circumstances,
This is very similar to the other example shown earlier.

Then it may go on to list events unique to energy contracts:

Serious accidents affecting the exploitation of the natural gas
deposit, the transport by pipeline in [seller's country], the handling,
the liquefaction, the storage, the loading operations, the transport by
LNG carriers, the discharge, the storage, the regasification, the
transport by the principal pipeline(s) from the regasification facility
and intended for the transport of the Natural Gas that is the subject
of the present contract, such that their consequences cannot be
remedied through the implementation of reasonable means at a
reasonable cost.
This language is specific to the LNG industry.

Take the example of a gas pipeline operator declaring force

majeure after its pipeline is damaged in an explosion and
they must repair the damage, return the pipeline to service,
and provide an alternative supply in the meantime.
Whether the duty to mitigate the effects of the explosion
on the pipeline also includes a duty to mitigate the effects
of the force majeure event by providing alternative gas
supply is not always as clear.
Force majeure risks affecting a gas supplier with multiple
off-takers might raise additional difficulties, such as order
of relief.

Could the pipeline operator be required to have the

pipeline repaired as soon as possible, regardless of cost?
If the pipeline operator is required to source alternate gas
for a buyer, is the cost or inconvenience of doing so
relevant?

Some agreements deal with such issues explicitly while

many others are silent.
Major disputes apply the commercial reasonableness
standard, which is frequently not defined in the contract.

Force majeure events are typically not a problematic source in

the contract negotiation.
A contractor may require that a force majeure clause be inserted
into the contract in a manner that allocates the risk of loss and
increased cost of performance to the owner.

A subcontractor may use a force majeure clause to shift the risk

to the contractor for unforeseeable delays that are beyond their
control.
In the absence of a force majeure clause, the performance risk is
presumed to rest with both parties equally.

While Acts of God, like hurricanes, are likely to be a

specified force majeure event, a court may not excuse a
partys performance due to a hurricane warning or
evacuation notice.
The owner may seek to have a hurricane notice included
as a force majeure event.
The contractor may counter to have other severe weather
and weather warnings negotiated into the clause as well.

Be mindful of risks events, like weather conditions,

commonly associated with the project location.
A contractor located in areas where extreme weather
conditions will negotiate terms for monetary relief in the
event of delays resulting from those events.
A contractor performing work in a region where extreme
blizzards are highly likely should make sure blizzards and
extreme weather conditions are written into the contract
or include this risk event into their bid price.

Was the civil turmoil in Egypt, Syria, Liberia, or Tunisia a

foreseeable force majeure event?
Were the bail outs in Cyprus a foreseeable force majeure
event?
What about the potential bankruptcy of Greece and
Portugal?

What about the volcanic eruption in Iceland in 2011 that

delayed planes and transportation of materials here in the
US?
The BP oil spill had more far reaching effects than just the
rig explosion. What other indirect force majeure effects
were there? Rig and vessel construction were halted due to
new laws and regulations.