Waking up to hear about volcanic ash clouds stopping all air travel seems like something out of a science fiction novel. It has very real consequences, however, for any business relying on international travel or dispatching or receiving goods by air freight.
Affected businesses unable to deliver on contractual obligations may wish to claim ‘force majeure', on the basis that the event is beyond the business' reasonable control. There is, however, no general right to be able to claim force majeure. If force majeure is to apply, this must be explicitly included in the contract (including a definition of what constitutes a ‘force majeure'). If there is no force majeure clause and the business fails to deliver on time, the other party to the contract may be entitled to claim damages or perhaps even terminate the contract.
Independently of force majeure, there is a concept of ‘frustration', which provides that a contract is automatically ended if a frustrating event occurs. This has a very narrow application and as the volcanic ash cloud is only likely to delay performance, not totally stop delivery, frustration is likely to be difficult and disproportionately expensive to argue.
This is a timely reminder of the need to include force majeure clauses in contracts. I expect that from now there will be explicit reference to ‘volcanic eruption' (already often included), but in the absence of this specific phrase it is likely that "act of God" will include this unusual event. As a reminder, an act of God is an extraordinary event resulting from natural causes without human intervention and which could not have been foreseen or guarded against. In the past a tsunami was considered to fall within this definition and the Icelandic volcano is a similar type of event.
Any business wishing to rely upon force majeure must review relevant contracts immediately. Often clauses have provisions requiring immediate notification and a failure to comply with these can render a subsequent force majeure argument redundant.
If you wish to discuss any of the issues in this blog, please contact Matthew Hattersley, a partner in Clarion's commercial law team, on 0113 336 3351 or email@example.com.
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