FORCE MAJEURE: Identification, Obligations, Continuation, End
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Mr. Jagdish Raje (Director, GEM Engserv)
Force Majeure
HIGHLIGHTS
  • Inability to full obligations attributable to the client or contractor or both
  • What does "Force Majeure" mean in contracts ?
  • Impact on CPM Scheduling
  • Case study is explained below to understand practically
  • Terminating the contract due to Force Majeure

There are instances in the course of a construction contract when the entire work or a part of it or any other contractual obligation cannot be performed. The reasons for such inability to fulfill such an obligation may be attributable to the client or the contractor or to both. There are situations where such a situation has to be effected due to the reasons not attributable to any party. Inability to meet the contractual obligations due to such reasons can be broadly called as Force Majeure.

Force Majeure is a very common term found in contracts. It literally means Superior Force. In practice it means a chance occurrence or an unavoidable accident.

To establish the existence of Force Majeure, the following criteria have to be applied.

  • 1. Such an event must be beyond the control of the affected party AND
  • 2. The affected party could not have REASONABLY provided for the occurrence of such an event in their contractual obligation AND
  • 3. Having arisen, the event or its effects cannot be overcome AND
  • 4. The event should not have been caused by or be attributable to the other party
  •  

It must be noted that the event that has caused the Force Majeure should satisfy all of the four criterion above simultaneously.

It is the obligation of the affected party to inform the other party of the existence of the Force Majeure as soon as possible. In case the existence of Force Majeure is established then the affected party is excused from performing those obligations that are directly affected by the Force Majeure. 

For example, a government ban on all construction activities in an area is a force majeure and the contractor, as the affected party shall be excused from performing any construction activity such as concreting, masonry, plastering, flooring etc. In this case, there is a Catch 22 situation with respect to concrete curing with water. If it is considered as a construction activity, then it should also be suspended and it’s adverse effects be borne. This may hurt the Client more than the Contractor. If curing is kept out of the ambit of construction and put under the maintenance of the constructed facility (which is generally a contractual obligation of the Contractor) then the curing can continue but contractor cannot be made to do it on a regular basis. Another solution would be to insist on chemical curing in such situations but the client must be ready to compensate the contractor for the additional cost of the chemical compound and the effort of spraying the same.

The duration for which the Force Majeure exists, the time period is extended for that period. Here the moot question is if the affected activities are not on the critical path, then would the Contractor be entitled to extension of the entire duration of Force Majeure?  

In India, the law appears not to have taken cognizance of the CPM scheduling. Therefore the rulings have generally granted the extension of time regardless whether the affected activities lie on the critical path or otherwise.

Normally, when a contractor informs of Force Majeure the Client is entitled to accept or reject it applying the tests mentioned above. In case the Client does not accept an event to be a Force Majeure then the Contractor has to perform his obligations. The Contractor may seek an extension or compensation in any other form through the dispute resolution process.

The Client in any case cannot suspend payments of monies due unless the Force Majeure event is such that it encompasses the activity of payment such as a general mass strike or an act of God like flood, earthquake etc.

The Force Majeure comes to an end when the event that has caused cease to exist or the effect of that event has been negated.

The Client also cannot terminate the contract due to Force Majeure. In case the Force Majeure prolongs for a long period, both the parties have an option to terminate the contract by consent.

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FORCE MAJEURE: Identification, Obligations, Continuation, End
Mr. Jagdish Raje (Director, GEM Engserv)
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