ICC published model force majeure clauses in March 2020. You can access ICC’s publication here. ICC came up with two types of model force majeure clauses – long form and short form. This is quite interesting. Something about many other boilerplate clauses, such as confidentiality and notice clause, a firm (or attorney) seem to always need to have two versions at hand – long and short versions. So ICC’s decision to publish two versions is quite useful.
As far as our experience allows us to comment, they are well thought and covers key issues regarding force majeure situations. We nevertheless thought it would be interesting to compare ICC’s long version of force majeure clause to some complex force majeure clauses we have encountered in our practice. Here few initial thoughts and comments
1. – In the definitions part “if and to the extent that the party affected by the impediment (“the Affected Party”) proves” is interesting. This implies that a certain event is force majeure in relation to a party to the extent that party can prove it to be such.
In our experience we often see “operative” part of a force majeure clause look along the following lines:
Affected party shall not be liable for failing to perform its obligations to the extent such failure is caused by a force majeure event.
It is hard to say for now the exact difference, but the difference comes down to exactly what we mean by a force majeure. Is force majeure an “objective” event – i.e., it exists irrespective of whether it affects a party? Is it always subjective – i.e., an event is force majeure only in relation to a certain party, in other words, it is force majeure to the extent it affects a party? ICC’s model clause follows the latter. It is interesting why then “if and to the extent” the part “ does not apply to “prevents or impedes a party from performing” obligations (which is in the same paragraph)?
We are sure ICC has many smart people, who have thought about these. Perhaps we are missing something.
To be sure and, we see people making mistake in practice, a certain event (whether we call is force majeure or not), such as pandemic, does not automatically release a party from its obligations. A party is excused from a performance only if the pandemic affects it. Therefore, the question of whether “is pandemic a force majeure” may not be the right question depending on how the agreement is drafted.
2.- In the part on definition of force majeure there is a list of conditions. In our experience we see two additional conditions:
(i) cannot avoid or overcome – this is different from “could not have been avoided”. This element relates to duty of a party to take reasonably actions to try to overcome or “obtain commercially reasonable substitute” (this I believe is from LMA contract). Note the difference between “could not have been…overcome” and “is not able to overcome”. Part 7 of ICC clause contains a duty to mitigate, however, obligation to try to overcome a force majeure may not be the same as the duty to mitigate. This, however, seems to be covered by ICC’s hardship clause, and
(ii) in order for an event to excuse a party from a performance, it must not result from misconduct or negligence of a party affected by it. The reason perhaps is that if a party somehow causes a certain event, that event would be under the party’s “control” or could “have been avoided”. But this may not necessarily be the case. For instance, a party may fail to comply with fire safety obligation, which would cause all kinds of catastrophe. It may not always be clear if those events were under control or could have been avoided.
3.- Part 8 of ICC clause is on termination. It contains a criteria for termination, which we do not often see in practice. It allows a party to terminate a contract if a party is substantially deprived of interest in a contract. This is apparently similar to what we can see in laws of some jurisdictions: those statutory provisions allow a party to terminate or amend a contract if there is “substantial deprivation of interest” in a contract.