Understanding Force Majeure (VIRTUAL) - FMV

Understanding Force Majeure (VIRTUAL) - FMV

Course Summary

Force majeure is a nebulous concept, it is both a legal doctrine (civil law systems) and a contractual creature (common law systems), it’s manifestation might not be as clear cut as one might first imagine and FM cases/disputes often involve very detailed investigation and complex legal arguments. Partly, this is due to an inconsistency in the application of logic and legal reasoning, not to mention a range of different jurisdictional treatments. FM is pan industry – any kind of commercial dealings are potentially impacted by the occurrence of a FM event. For those engaged within the negotiation of commercial agreements, the importance of FM can never be understated. This programme has been deliberately designed to create an in depth, holistic understanding of Force Majeure and to provide an immersive experience to delegates through the use of case law; case studies and class exercises. The focus is on open dialogue, information sharing and collective problem solving.

On completion of this course, delegates will:

• Become familiar with the different approaches to FM within both Civil and Common Law systems
• Understand what the parameters of causal factors are. 
• Grasp the importance of causality and the ‘causal linkage’ to an event’s occurrence
• Gain insight into the relationship between FM events and human decision making and actions
• Know what is needed in terms of evidentiary requirements to establish the standard of proof for a FM event
• Have awareness of the requirements for notification under FM
• Be able to ascertain the subtle differences in how FM is treated within different legal jurisdictions.
• Understand the differences and interconnections between FM; Material Adverse Changes (MAC) and Material Adverse Events (MAE)
• Be able to assess possible problems and considerations post an FM event occurring
• Gain insight into the relationship between FM and AI and where possible issues could arise.

Course Content

Topic 1: The Civil and Common Law treatment of FM:

• The civil perspective:
  • A statutory, codified right
  • Assessing the quantum of impediment
  • Derogation
  • Hardship vs. impossibility
• The common law perspective:
  • No implied protection (UK)
  • No general doctrine of FM (UK)
  • The doctrines of impossibility, frustration and FM
  • Precedent – can the same point of law reflect the ‘same’ FM event

Topic 2: Examining the parameters of the causal factors that determine FM

• The problem with defining FM – what actually is it?
• The manifestation of the event and the issue of non-performance
• The nature of the contractual obligation – primary or not?
• Setting the scope of the FM contractual provision – the ramifications of ‘wide’ vs. ‘narrow’
• The potential dichotomy of ‘specified/named’ FM events and ‘any other causes’ provisions
• The Ejusdem Generis Rule – a helpful or harmful principle of contract interpretation?
• Case: Sonat Offshore SA v 2 Amerada Hess Development and Texaco (Britain) [1988] 1 Lloyd’s Rep 145
• Case: Tandrin Aviation Holdings Limited v Aero Toy Store LLC [2010] EWHC 40
• Examining ‘reasonable control’
• Examining the concept of ‘fault’

Topic 3: The Doctrine of Remoteness - causal chains and supervening events

• Case:  Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102L
• Linkage and outcome – direct vs. indirect events
• Defining triggers
• Examining causal feedback loops -negative and positive
• 3rd parties and supervening events (Novus Actus Interveniens)
• Supervening illegality – a critical examination of the governing law; the forum and the place of performance
• The relationship between frustration and supervening events
• The road to non-performance – a foreseeable path?
• Exploring alternatives or impossibility for performance  
• Exercise: stopping to take photographs

Topic 4: The human factor – the decision-making conundrum -igniting liability?

• Negligence and FM
• Disobeying orders and not following instructions – ‘wilful misconduct’?
• Vicarious liability and FM
• Exclusion clauses and negligence
• Case: Canada Steamship Line
• Deliberate vs. accidental mistakes/acts/omissions – the ‘beyond control’ dimension
• Arriving at a nexus of default or non-fault
• Exercise: Driving in a storm

Topic 5: Examining the standard of proof – evidentiary requirements

• Interpreting the FM clause in a contract- is it valid?
• FM is not self-judging
• Objective vs. subjective -what is the standard of assessment for a FM event?
• The ‘3 requirements’ – unforeseeability; externality; impossibility
• Impossibility and hardship
• Sole cause and the ‘but for’ test
• Factual and legal – two significant dimensions of analysis
• Exercise: The Remote Army Base

Topic 6: The vital importance of notice

• Notification in FM – a ‘condition precedent’?
• The contents of the notification – the event; the magnitude of effect/impact; the duration
• Stipulated timing specifications
• Case: Zhoushan Jinhaiwan Shipyard Co Ltd v Golden Exquisite Inc & Ors [2014] EWHC 4050
• Methodology and contents of notification.
• Case: Southern Solar Power v Bangladesh Power Development Board (ICC Arbitration, reported 2023).
• The implied duty of mitigation
• Documentation management/updates
• Case: Mamidoil-Jetoil Greek Petroleum v. Okta Crude Oil Refinery [2003] 1 Lloyd’s Rep 1 at [134])
• Case: 2 Entertain Video Ltd v Sony DADC Europe Ltd. 

Topic 7: Some key jurisdictional differences in FM treatment

• France – satisfaction of 3 elements – external; unforeseeable; irresistible (impossible) to perform, very strict interpretation by courts, particularly around impossibility
• UK – No implied protection - FM events must be expressly stipulated within contract – not so -no remedy. Frustration a possible alternative.
• Germany – no need to cite FM – primary focus – impossibility of performance and allocation of risk – the question of foreseeability and risk exclusion
• China – may allow either partial or complete exemption under FM, often a political dimension
• Case: Unibank Savings & Loans Ltd v Absa Bank Ltd [2000] (South Africa).
• USA – treatment fragmented between states 
• Norway – no exemption from the duty of ‘good faith’
• India – courts may consider FM and Frustration as mutual concepts
• Middle East – high degree of judicial discretion
• Japan -cautious regarding FM

Topic 8: Dealing with Material Adverse Change (MAC)/Material Adverse Events (MAE)

• The difference within these concepts examined
• Material Adverse Change (MAC) - Protection strategies –cost escalation and price variation; renegotiation, hardship clauses (termination); insurance; liability caps and limitation clauses
• Case: BM Brazil 1 Fundo De Investimento v Sibanye [2024] EWHC 2566 (Comm)
• Liability exclusions examined in more detail – consequential /incidental loss; loss of profit; non-foreseeable losses (special losses)
• Carve outs examined in more detail – IP infringement; disclosure/confidentiality breach; physical injury and property damage; regulatory imposed penalties/fines; indemnification agreements (obligations).
• Understanding the 3 pillars of any commercial contract – liability; indemnity and insurance
• Examining Liquidated Damage Clauses – termination and delay provisions
• Examining Extension of Time Clauses – termination and delay provisions

Topic 9: Possible problems and considerations post an FM event

• 3 ‘Arena’s’ of concern –legal; operational (commercial continuity) and financial
• The critical ‘Arena facts’ that must be managed
• What remedies and reliefs are available?
• Assessing tangible and intangible issues
• Triggers and time bars
• Performance alternatives – will they be acceptable?
• The question of ‘reasonable or best endeavours’
• Case: MUR Shipping v RTI Ltd
• The relationship of the FM event with variation/suspension/termination contractual protocols – can the contract be put ‘back on track’?

Topic 10: Artificial Intelligence and FM – bonus or bane?

• Exploring the legal status of AI
• Does AI manage contractual risks – or create them? A definite double-edged sword
• Dealing with the ‘Ghost in the Machine’ where does liability go? 
• The question of negligence – a lack of human oversight?
• The problem of no 3rd party verification in SMART/Blockchain contracts
• Is a software malfunction/hack breakdown foreseeable?
• The EU’s ‘Development Risk Clause’ (Product Liability Directive) – a defence or a future problem?