Any well-drafted commercial contract will contain a range of terms and conditions that clearly set out the rights, responsibilities and obligations of each party. As a legally binding document, parties enter into a contract in the knowledge that any contract breaches can be enforced by a court of law.
First, we will consider some types of breach of contract under UK law for which legal remedies may be available:
- Minor breach of contract – for example, a small change is made to the goods or services provided, but this does not substantially affect the fulfilment of the contract.
- Material breach of contract – a failure to fulfil a key part of the contract, for example one which has a detrimental impact on the goods or services expected by the receiving party.
- Anticipatory breach of contract – one party clearly demonstrates that they don’t intend to fulfil all or part of their contractual obligations, although the contract terms have not yet technically been breached.
- Repudiatory breach of contract – this is an extremely serious breach that may lead the injured party to terminate the contract.
A breach of contract claim, if upheld in a court of law, can help minimise the impact of the losses suffered by the injured party. But what if the breach in question was caused by a circumstance beyond the control of the unperforming party?
From the war in Ukraine to the havoc wreaked by wildfires in recent years, large-scale man-made and natural disasters have increased over the past few decades. For businesses, this has reinforced the importance of building protection against such risks into contracts.
The term ‘force majeure’ (from the French for ‘greater force’) refers to an event that is beyond the control of the affected party to the contract. Examples include: the outbreak of war or political conflict, terrorism, labour strikes, infrastructure failure (eg power cuts), a natural disaster or a public health emergency (eg the Covid-19 pandemic).
Unlike breach of contract, however, the legal concept of force majeure is not fully recognised nor defined under English common law. You cannot simply invoke force majeure as the reason why you have failed to fulfil a contract if no clause to that effect is present.
Force majeur clauses in contracts
A force majeure clause in a contract might typically excuse the party affected by the event of force majeure from performance of their obligations.
In some contracts, this clause is very vague and leaves the concept of what constitutes an event of force majeure open to interpretation leading to uncertainty and potential disputes.
In other contracts, the specific events that will trigger the force majeure clause are clearly defined. Whilst this provides certainty, there is a risk that this prescriptive approach might exclude an unlisted event beyond a party’s reasonable control that leads to that party being unable to fulfil its obligations.
The concept of ‘frustration’
Frustration is another legal concept a party may rely on to terminate a contract. Frustration refers to an unforeseen, ‘supervening’ event that occurs after the contract has been entered into, which renders it physically, legally or commercially impossible to fulfil the contract terms. While force majeure can suspend a party’s obligations, frustration inevitably ends the contract.
Unlike force majeure, frustration is a recognised legal concept under English law and doesn’t need to be expressly included in a contract to be relied upon. However, frustration is extremely difficult to prove and case law shows that a very high threshold of impossibility must be met before a contract is considered frustrated.
Expert commercial contract law advice
As this article has demonstrated, uncontrollable events that prevent the fulfilment of a contract can be complex to resolve under English law. That is why it is highly recommended to seek expert advice not only at the time of a contract dispute, but also at the drafting stage, to provide the best possible protection and avoid disputes arising later down the line.
At Woodfines, our experts have years of experience in supporting businesses, resolving contract disputes and achieving the best possible commercial outcomes. Should you wish to find out more about our services or to instruct us on a contract matter, we’d be delighted to help.
Contact Woodfines Solicitors on www.woodfines.co.uk
Gillian Harding
Senior Associate Corporate & Commercial Woodfines Solicitors
