New BIMCO Force Majeure Clause Ready For Review
BIMCO’s new Force Majeure Clause is advancing and will provide a high threshold for invoking it in order to avoid abuse. The party seeking to rely on the clause must have been prevented from performing an obligation under the contract and will have to prove that:
- the force majeure event was beyond its control;
- it could not have foreseen the force majeure event at the time of the contract; and
- it could not have avoided or overcome the effects of the force majeure event.
The list of what counts as a force majeure event is quite comprehensive and includes both the traditional types of event such as natural disasters, explosions and strikes, and more modern and topical events such as cyber-attacks and pandemics.
A number of requirements on the affected party are set out during the various phases of force majeure. This is to enable the party receiving the force majeure notice to better plan its next steps. There is also a “soft” provision included to encourage the parties to cooperate and discuss alternative ways to perform the contract.
The main remedy under the clause is non-liability for damages for breach of its contractual obligations. Under English law, the affected party would have been in breach for not performing without a force majeure clause to rely on.
Termination should be seen as the very last resort and is only available:
- if force majeure renders performance of the contract impossible, illegal or radically different from what was intended at the time of the contract, or
- after an agreed amount of days from the notice and if the force majeure substantially affects the performance of the contract as a whole.
The first test for termination largely mirrors the test for frustration under English law. However, if a party can bring itself within this provision, it will be able to terminate immediately without having to wait for a certain amount of time. The second test provides a long-stop number of days for termination.
If the clause is incorporated into a voyage charter party, laytime and demurrage will not be affected and will continue to run. Other payment obligations will also be intact if not directly affected by force majeure.
The drafting team is now exploring the possibilities of developing an additional, bolt-on, provision to cater for where there is cargo on board the vessel when force majeure is declared.
The aim is to publish the new BIMCO Force Majeure Clause during the first half of 2021.