Articles

War as a Force Majeure Event

March 19, 2023March 19, 2023
War as a Force Majeure Event

Author: Narmin Huseynzada, LLB, Baku State University, 2016-2020

Editor: Bader Kabbani, LLM International Commercial and Economic Law, SOAS, University of London, 2020-2021

Abstract

In most contracts, force majeure clauses consider the war an impediment preventing parties’ performance. This article argues that war outbreaks cannot always be reliant on the force majeure clause. 

Introduction

War affects every aspect of life, and its severe consequences are not easy to overcome. Since contract parties are under the duty to perform their contractual obligations, certain exemptions like force majeure clauses may assist parties to suspend or terminate their duties such as the outbreak of war. On the other hand, analysis of case law shows that the war in itself did not exempt parties from obligations while courts evaluate how its consequences affect the performance. This article aims to assess each element of force majeure under the light of the International Chamber of Commerce’s 2020 Force Majeure Clause, and how these elements are applied in war situations.

Force majeure and war

Parties of the contract are free to define the scope of force majeure events and the regulation of obligations in case of the occurrence of a force majeure event. However, to facilitate its application, ICC prepared force majeure model clauses. According to the ICC Force Majeure Clause 2020, the force majeure event occurs if impediment (1) beyond the parties’ reasonable control, (2) could not reasonably have been foreseen at the time of the conclusion of the contract, and (3) effects of the impediment could not reasonably have been avoided or overcome by the party relying on it [1]. If the impediment satisfies the first and second conditions, then the affected party should prove to the third condition that the effects of the impediment could not reasonably have been avoided or overcome. 

As to the Model Clauses, several events were listed as force majeure events (war, hostilities, invasion, riots, sanctions, etc.). However, they are not automatically considered force majeure events. The affected party must show the causal link between the occurred event and the impossibility to perform the contract. Because the existence of an impediment is not enough to relieve a party from its obligations. The impediment must be the only reason for excusing performance. For instance, if a seller’s warehouse is located outside the parts of the country in which military actions are conducted, then the seller cannot rely on force majeure due to the war. In Hilaturas Miel, S.L. v. The Republic of Iraq, the court accepted hostilities (Iraq war) as a force majeure, because confirmation of acceptance of the goods was an essential term of the contract and as a result of the war this condition cannot be executed [2].

Beyond reasonable control

The impediment is beyond the reasonable control of the affected party if it is not within the limits of potential risks. It means, a simple inability to perform an obligation does not amount to a force majeure event. Contractual risks, like changes in market price, unavailability to provide agreed goods from the manufacturer, etc. generally accepted within the parties’ normal business risks. In 2 Entertain Video Ltd v Sony DADC Europe Ltd, rioters broke into the warehouse Sony, set off bombs, and caused a fire that destroyed all stock. The court held that although riots were unforeseen, arson and fire were within the reasonable control of Sony, as it could have taken proper security measures against break-ins and arson [3]. 

Unforeseeability

The impediment must satisfy the “foreseeability” standard. Here, it must be observed that the event that occurred must have not been foreseen. At first glance, it seems that war by its nature, cannot be foreseeable. However, in Berline v. Waldschmidt court stated that “on May 27, 1939, events transpiring in Europe were of such character that it was not only reasonable to foresee that within a short space of time, the nations of that continent were once again to become engaged in a great conflict but unreasonable to contemplate that that situation was not inevitable”. Here the court not only looked at foreseeability of the event but also how it was “reasonable to foresee” [4]. Even though parties cannot foresee the coming war, they can reasonably predict that events can lead to war, relying on surrounding events and the historical background. Generally, courts evaluate the foreseeableness of the event in a very narrow meaning, but it is questionable whether this kind of strict approach should be applied in case of war as well. In any case, it is clear that courts evaluate according to the obligor’s sphere of risk, and whether it is reasonable to expect the parties to predict its occurrence [5]. 

Unavoidability

In the model clauses sense, the event must be so unavoidable that the affected party has no choice but to sustain performance. It means that if the affected party can avoid or overcome the impediment with additional means he is obliged to do so. In case of war, it is not reasonable to expect that the party can avoid it. Therefore, a party relying on force majeure must prove its inability to avoid or overcome the effects of impediment. For instance, if a supplier can replace agreed goods from other manufacturers located outside the war zone, he cannot rely on force majeure clauses even if he should bear additional costs. In Macromex Srl v Globex Int’l Inc, the tribunal held that even though avian flu breakout started and all chicken imports were banned by the government, the seller can avoid its effects by shipping to the neighboring ports as per the request of the buyer [6]. 

Conclusion

The wording of the force majeure clause is a key factor while drafting the contract. In practice, force majeure clauses are accepted as boilerplate clauses. But one must keep in mind that each party should evaluate political and economic circumstances surrounding its influenced states, considering the global situation in commercial activity. Because even if the parties are not in a state of war its consequences can affect contract parties outside the war zone. 

Parties can add war specifically or as a part of armed conflicts, or choose a more detailed approach by listing events (sanctions, embargo, etc.) that can happen as a result of war. In any event, case law shows that even if force majeure clauses contain war, the causal link between war and impediment must be established to accept it as a force majeure event. 

It is also necessary that the event must be unforeseeable and unavoidable. Even war in certain cases can be predictable and parties, in any case, must seek other options to overcome impediments if it is possible. That’s why it will be reasonable to consider each element of force majeure respectively and give a clear definition in contracts.

References

  1. ICC Force Majeure And Hardship Clauses March 2020, https://iccwbo.org/content/uploads/sites/3/2020/03/icc-forcemajeure-hardship-clauses-march2020.pdf
  2. Hilaturas Miel, S.L. v. The Republic of Iraq, para 45-47 (20 August 2008), http://www.unilex.info/cisg/case/1465
  3. 2 Entertain Video Ltd v Sony DADC Europe Ltd EWHC 972 (TCC), para 207, (24 April 2020) https://www.casemine.com/judgement/uk/5ea665ab2c94e0069fe9a432
  4. Berline v. Waldschmidt, para 12, (10 March 1945)
  5. Schwenzer, ‘Article 79’ (n 29) 1134, Flambouras (n 43) 270
  6. Macromex Srl v Globex Int’l Inc (16 April 2008)

Bibliography

  1. ICC Force Majeure And Hardship Clauses March 2020, https://iccwbo.org/content/uploads/sites/3/2020/03/icc-forcemajeure-hardship-clauses-march2020.pdf
  2. Hilaturas Miel, S.L. v. The Republic of Iraq, para 45-47 (20 August 2008), http://www.unilex.info/cisg/case/1465
  3. 2 Entertain Video Ltd v Sony DADC Europe Ltd EWHC 972 (TCC), para 207, (24 April 2020) https://www.casemine.com/judgement/uk/5ea665ab2c94e0069fe9a432
  4. Berline v. Waldschmidt, para 12, (10 March 1945)
  5. Schwenzer, ‘Article 79’ (n 29) 1134, Flambouras (n 43) 270
  6. Macromex Srl v Globex Int’l Inc (16 April 2008)
  7. UNCITRAL Digest of Case Law on the United Nations Convention on Contracts for the Sale of Goods 2016 Edition, p. 374-379
  8. Willem H van Boom, The Great War, and Dutch Contract Law: Resistance, Responsiveness and Neutrality, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2544542

 

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