March 11, 2022
Following my colleagues’ recent consideration of force majeure clauses (in light of recent extreme weather and flooding events in Queensland) it is also timely to address the potential impacts of another force majeure event; war.
Recent tensions between Russia and Ukraine have escalated into war. The world looks on with renewed uncertainty as the effects of this conflict ripple through global markets, which are already stressed by the COVID-19 pandemic. Fortunately, the horrors of war have not reached Australia’s shores. Unfortunately, as our international trade partners experience renewed disruptions such as increased commodity prices, reduced supply of raw materials, pauses in manufacturing, reduced and congested supply routes, and increased shipping costs, the impacts to global supply chains will likely be felt by the domestic market in the coming months.
Oil and gas markets have already experienced significant disruption. In the wake of global sanctions against Russia, the price of crude oil has soared. Europe has begun reducing its dependence on Russian energy – which accounts for approximately 25% of Europe’s crude oil needs, and 40% of its natural gas consumption. A scramble for alternative energy sources will likely add to current price hike woes and supply delays.
As we have seen, the occurrence of multiple and concurrent events that could be deemed force majeure, where contracting parties can be prevented from performing their obligations under a contract, is a real possibility. Where a contract does not provide relief to a contracting party for events beyond its control, sudden delays may give rise to unanticipated claims, and requests for relief including extensions of time, recovery of additional costs, or other excuses from liability, may not be available. Consequences of this nature may be avoided by the contemplation of a force majeure clause prior to entering into a contract.
Australian Standard form construction contracts, including AS 4000-1997 and AS 4902-2000, in their unamended form, do not include provisions for force majeure. Without sufficient protection, a contracting party may be exposed to undesirable risks.
A comprehensive and effective force majeure clause may:
- define war as an event for which a claim for force majeure may be made;
- describe the steps to be undertaken by the parties to notify of the event; and
- relieve the affected party/s of its obligations (for the duration of the force majeure event).
LPC Lawyers
If you are a party who will be entering into a contract in the future, it may be prudent to “future-proof” your next project and consider negotiating the inclusion of a suitable force majeure clause into the contract. If you are a party that has been, or could be, affected by any of the recent events, it may be worthwhile to review your current contract suite to identify where any relief may be sought.
Please do not hesitate to contact LPC Lawyers for a discussion on how we can assist.
The contents of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
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