Winter is just around the corner and the possibility of extreme weather conditions returns. The Dover Port closing owing to 80mph winds in February 2014, strikes at the port of Calais, 2011 riots and volcanic ash cloud in 2010 are not too distant memories of unexpected events which stopped the wheels from turning and bought business operations to a halt. Operators must take steps to plan ahead for unexpected events which could impact on their ability to meet their contractual arrangements.
Force majeure – the basics
Force majeure clauses are crucial for hauliers where goods are damaged or lost in transit or where there is a delay in the delivery of goods owing to a force majeure.
What can hauliers do?
By taking note of the three points below, you can help to ensure the force majeure clause in your contracts is adequately drafted to cover unexpected events and protect you and your business.
1. Restrict liability - The clause must expressly restrict liability for loss or damage to goods caused by a force majeure event. In some cases an obligation to mitigate loss will be added, such as to take reasonable care to minimise the effects of a force majeure. To avoid failing under the Unfair Contract Terms Act 1997, the clause must be reasonable and a party cannot, for example, exclude liability for its own breach of contract.
2. Ensure the clause is specific - The series of events and circumstances which excuse contractual performance must be tailored to the specific contract. Floods and riots are one thing, but an operator must think outside the box and guard against other events which would impact on their business operations. For instance, an operator may wish to protect against accidents that could occur when transporting hazardous goods, or against the closure of a major network which they have to use.
3. Check how the clause operates - It is important to check how the clause operates to ensure that in the event of a force majeure, operators are not left uncertain about their contractual obligations. When activated, a force majeure clause can operate to:
- Prevent performance entirely (meaning performance must become completely impossible).
- Suspend a party’s obligations whilst the force majeure event continues (in some circumstances, notice of the force majeure must be served by the non-performing party on the other party).
- Provide that liability for non-performance or delay in performance is removed whilst the force majeure event continues.
- Contain an obligation to mitigate.
- Include a right to terminate when (1) the event does not pass within a certain time frame and (2) it becomes commercially impractical for the parties to continue with the performance of the contract.
Force majeure clauses, their interpretation and enforceability can be a rich feeding ground for litigation. Hauliers should therefore ensure that their clause is tailored to their business to prevent any uncertainty, and find out what their agreements say in relation to dispute resolution provisions to offer the best protection when an unexpected event arises.
If you are reviewing your terms and conditions at the moment, consider your force majeure clause before winter approaches.
Authors: James Lappin and Michelle MaherThis information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.