In May 2024 the UK Supreme Court held that a requirement that a party to a general force majeure clause is obliged to adopt “reasonable endeavours” to overcome a force majeure event does not include accepting an offer from the other party of non-contractual performance unless there is clear wording to that effect in the force majeure clause.

Force majeure clauses relieve a party from its obligation to perform under a contract on the occurrence of a specific event or state of affairs. Such clauses commonly provide, expressly or impliedly, that the clause cannot be relied upon if the effects of what would otherwise be a force majeure event or state of affairs could be avoided by the exercise of reasonable endeavours by the party affected. The question that arose was whether the exercise of reasonable endeavours may oblige the party affected, if it is to be entitled to rely on the clause, to accept an offer of non-contractual performance from the other contracting party in order to overcome the effects of the event or state of affairs. There were conflicting judgments on this issue in the UK.

The contract was a contract of affreightment. The force majeure event had to meet certain criteria including that “it cannot be overcome by reasonable endeavours from the party affected”. The contract required payment in US dollars which method of payment was prevented by sanctions arising from the Russia/Ukraine war. The appellant as payee invoked the force majeure claim. The respondent as payor rejected the force majeure notice and offered to pay in Euros instead of US dollars and to bear any additional costs or exchange rate losses in converting the currencies. The offer was rejected.

The court accepted that the question was one of causation. A party is excused from performance by a force majeure event where the failure to perform is caused by the event unless the affected party can reasonably prevent the failure of performance. The failure to perform will then be the affected party’s inadequate response to the event rather than the event itself. The relevant question is whether reasonable endeavours could have secured the continuation or resumption of contractual performance. In the present case, the required performance was payment in US dollars. The impediment was the banking delays resulting from the imposition of sanctions. The court held that clear words are needed if there is to be any contractually required change to the parties’ rights. Certainty is required in commercial contracts.

The finding that the party affected did not have to accept an offer of non-contractual performance in the absence of clear wording to that effect was based on “good reasons of principle” and preferred case law. There is no reason therefore why this judgment should necessarily be followed in South Africa, and on the facts it appears to be an unreasonable result. Those drafting contracts should look at their force majeure clauses and decide whether it is necessary to put in clear wording to the effect that reasonable endeavours include acceptance of a reasonable offer of non-contractual performance.

[RTI Limited v MUR Shipping BV [2024 UKSC 18]https://www.supremecourt.uk/cases/docs/uksc-2022-0172-judgment.pdf