Force majeure clauses
The first question must always be: what does the contract say? Under English law “force majeure” does not apply automatically but only if it is provided for in the contract, and only in the terms specified in the contract. Even if there is a force majeure clause, it may not relieve the parties of their obligations in the current crisis. It all depends on the precise wording of the clause.
Many standard clauses refer to a list of specified events followed by general wording such as “or any other event comprehended in the term ‘force majeure’” (as in the “Prevention of Delivery” clause in Gafta sale contracts). Since there is no legal definition of the term force majeure in English law, this kind of clause creates some uncertainty. However, if coronavirus leads to an event which is expressly mentioned (such as a government export ban or closure of ports) this may count as force majeure even if the disease itself is not mentioned.
The wording of the clause may also define how the specified events affect the contract. A party may be exempted from liability if performance is “prevented” but not if it is simply delayed or becomes less profitable. Relying on force majeure may even lead to additional cost, if the clause requires the affected party to prove that he has used “all reasonable endeavours” to perform the obligations. The wording must always be carefully checked before deciding how to proceed.
There is no general rule under English law that a force majeure event must be unforeseeable at the time of the contract. When negotiating any new contract, it may therefore be possible to amend a broadly-worded clause and limit it to unforeseeable events.