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FORCE MAJEURE
Force Majeure
What is Force Majeure?
Force Majeure
is a clause in contracts which essentially frees both
parties from
liability
or obligation when an extraordinary event or circumstance
beyond the control of the parties, such as a war, strike,
riot, crime, or flooding, earthquake, volcano prevents one
or both parties from fulfilling their obligations under the
contract. However, force majeure is not intended to excuse
negligence or other malfeasance of a party, as where
non-performance is caused by the usual and natural
consequences of external forces, or where the intervening
circumstances are specifically contemplated.
- "No Party
shall be liable for any failure to perform
its obligations where such failure is as a
result of Acts of Nature (including fire,
flood, earthquake, storm, hurricane or other
natural disaster), war, invasion, act of
foreign enemies, hostilities (whether war is
declared or not), civil war, rebellion,
revolution, insurrection, military or
usurped power or confiscation, terrorist
activities, nationalisation, government
sanction, blockage, embargo, labour dispute,
strike, lockout or interruption or failure
of electricity, and no other Party will have
a right to terminate this Agreement under
Clause (Termination) in such circumstances."
- "Any
Party asserting Force Majeure as an excuse
shall have the burden of proving that
reasonable steps were taken (under the
circumstances) to minimize delay or damages
caused by foreseeable events, that all
non-excused obligations were substantially
fulfilled, and that the other Party was
timely notified of the likelihood or actual
occurrence which would justify such an
assertion, so that other prudent precautions
could be contemplated."
The clause in
a supply contract which allows the seller not to
deliver or the buyer not to take delivery of the
goods under the contract because of events
beyond the seller's control. An unexpected
occurrence beyond the control of parties to a
contract, such as an earthquake preventing the
timely delivery promised, that typically
relieves a party from contract performance. The
language of the contract, as well as applicable
laws, determine the applicability of this legal
mechanism in anygiven situation.
Where the
terms and conditions of contract do make an
expressed provision for a particular
circumstance then those terms and conditions
must prevail.
However
circumstances such as weather may not be
expressed in the terms and conditions and it is
typically this scenario where the question of
liability for the parties costs, time and
damages arises.
It is
important to remember that force majeure
clauses are intended to excuse a party only if
the failure to perform could not be avoided by
the exercise of due care by that party.
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