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Forced to stop performance of a contract?

Have you been forced to stop the performance of a contract or concerned that soon you will be?

As stated in a previous article of ours, there are several ways in which a contract can be terminated. One of those ways is where practical circumstances trigger the operation of a contract’s force majeure clause. Such clauses can serve to protect parties to a contract that may involuntarily fall into breach of a contract, where such breach is a result of a force majeure event (sometimes referred to as an ‘act of God’).

Force majeure is an unexpected circumstance outside of a party’s control that has stopped that party (or both parties) from being able to comply with the terms of a contract and their contractual obligations in general. A well-drafted force majeure clause will include a definition of what a force majeure event is (e.g. war, strikes, flooding, abnormal storm). This will assist the parties in establishing whether and when such a clause would operate. Such event may be provided for within a clause in a contract, allowing the contract to be terminated where a defined event causes a party to breach their obligations.

Such a term, if enforceable, would either entitle a party to cancel the contract, excuse a party (or both parties) from their performance of the contract or suspend their performance. Each force majeure clause will speak for itself and the meaning and effect of such clauses can differ from another.

When attempting to enforce a force majeure clause, you will need to prove the following:

  • That an event took place (such event will need to be referred to within the clause in the contract);
  • That you have been prevented from performing your end of the contract;
  • That your non-performance was beyond your control; and
  • That you could not have reasonably avoided the event or the relevant circumstances.

Equally, you may find yourself on the other side e.g. where the other party is not able to perform an obligation you are expecting them to. In those circumstances, you might wish to consider challenging the force majeure clause under unfair contract terms legislation. In those circumstances, you would need to prove that such clause does not satisfy the ‘reasonableness test’.

Usually, notice would need to be given, in line with the terms of the contract, for a party to rely on the force majeure clause as a means of termination.

Should you require any assistance in relation to a contract you have signed or maintaining your obligations under such contract, please contact our commercial litigation team here.

 

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