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Expecting the unexpected: the BIMCO Force Majeure Clause

Expecting the unexpected the BIMCO Force Majeure Clause | BDM Blog | BDM Law

Recent world events have underlined the unpredictability of the modern world and the need to provide contractually for the unexpected. This is particularly true as the term “force majeure” is not a recognised legal concept under English law.

The release of the new BIMCO model Force Majeure Clause will be a welcome development for the shipping industry. It is a generic clause designed to be used in a wide variety of shipping contracts. However, BIMCO advise that parties should read the wording of the clause and the explanatory notes carefully before using the clause and that parties may need to adapt it to cater to the specific needs of their contract. BIMCO specifically urge caution when including the clause in a period time charter party with a broad trading area.

The clause defines “force majeure” and provides a non-exhaustive list of force majeure events. The clause outlines what a party needs to prove to invoke force majeure and sets out the affected party’s duties with regard to giving notice and mitigation.

There is a “cooperation” provision – the “philosophy behind the clause”, according to BIMCO – which provides that the parties shall cooperate in good faith to minimise the effects of the force majeure. Termination is seen as a last resort, and only if performance under the contract has become impossible, illegal or radically different, or the force majeure has substantially affected the performance of the contract as a whole for an agreed number of days.

Where the Force Majeure Clause is used in a charter party or contract of affreightment, it is recommended that the parties consider adding subclauses that clarify the position with respect to hire or laytime/demurrage. The explanatory notes contain proposals for such additional clauses. The proposed subclause (h) clarifies that laytime/demurrage or hire will continue to run/accrue, while proposed subclause (i) clarifies that while a vessel has cargo on board neither party shall have the right to terminate the contract.

We anticipate that the BIMCO clause will resolve some of the problems caused by poorly drafted force majeure clauses. But the most striking feature of the clause is its cooperation/good faith provision. It remains to be seen how courts/tribunals deal with that in practice given existing case law in this area. There are similarities with good faith provisions in the context of dispute resolution clauses and in that context the House of Lords’ decision in Walford v Miles1 and Teare J’s decision in Emirates Trading v Prime Mineral Resources2 may be relevant.

(1) Walford v Miles [1992] 2 AC 128
(2) Emirates Trading v Prime Mineral Exports [2015] 1 WLR 1145.

Nick Burgess - author profile
Nick Burgess
Partner
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Constantin von Hirsch
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